The warnings sent to banks by three of the top US banking regulators about the liquidity concerns associated with stablecoin-related reserves and other funding sources from crypto companies have increased, according to Bloomberg.
Following the FTX crash, three agencies—the Fed, FDIC, and OCC—took a more assertive stance, highlighting liquidity risks that suggested stablecoin use.
“Recent events in the crypto-asset sector have underscored the potential heightened liquidity risks presented by certain sources of funding from crypto-asset-related entities,” the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. said in a statement on Thursday.
The three watchdogs noted that deposits with stablecoin-related reserves are particularly vulnerable to unforeseen large and swift outflows in the cryptocurrency markets.
The entities also cautioned banks to carefully examine any deposits made by cryptocurrency businesses when they are linked to the clients of those businesses.
After the failure of the cryptocurrency exchange FTX, regulators adopted a more assertive stance. They are worried that the dangers associated with cryptocurrencies may eventually damage the country’s banking system’s stability.
They also warned banks in the statement released on Thursday about the risk of client confusion due to “inaccurate or misleading representations of deposit insurance by crypto businesses.”
The Fed, OCC, and FDIC cautioned banks to handle cryptocurrency-related deposits per current risk-management practices.
On Thursday, Binance said that it had mistakenly classified some Australian users as “wholesale investors,” which had led to the abrupt closure of their derivative holdings.
Documents reveal that in compliance with local laws, Binance Australia has previously prohibited retail traders from trading futures and financial derivatives products on the platform. On Binance Australia, only “wholesale” traders are permitted to trade such products.
“We have already contacted all impacted users and will fully compensate them for their losses incurred while trading derivatives on Binance,” Binance stated in a tweet.
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