The US Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have warned banks of the risks associated with cryptocurrencies.

In a joint statement, the regulatory bodies said financial institutions should be aware of cryptocurrency-related frauds and scams, misleading representations and disclosures, market volatility, stablecoins, and contagion risks.

The regulators said that holding or issuing crypto assets on a decentralized network is inconsistent with safe banking practices, but added that banks should not be discouraged from offering such services if permitted by law.

The warning comes after the collapse of Bahamas-based exchange in November 2022, which was followed by revelations of poor disclosure and alleged misappropriation of funds.