U.S. Regulators Warn Banks of Heightened Liquidity Risks in Crypto-Related Deposits

Crypto imploded in 2022, as investors lost faith in digital assets and the industry was plagued with crisis. But unlike other collapses, it has largely avoided rippling into other markets. WSJ explains how crypto became so interconnected. Illustration: Mallory Brangan

By Paul Kiernan

Updated Feb. 23, 2023 5:46 pm ET

WASHINGTON—A trio of regulators including the Federal Reserve warned banks to be mindful of liquidity risks related to cryptocurrencies, the latest move by U.S. officials to limit the economy’s vulnerability to the tumultuous market.

The Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. said in a joint statement Thursday that banks should apply effective risk management when dealing with deposits linked to crypto entities. These include robust due diligence and monitoring of crypto entities that establish deposit accounts, as well as incorporating the potential volatility of those deposits into routine stress tests.