Recently, three US federal agencies published a document outlining the risks for banks planning to custody cryptocurrency on behalf of their clients.
Overview of the Document
The document titled 'Crypto-Asset Safekeeping by Banking Organizations' emphasizes the importance of risk assessment, which includes understanding the complexities of cryptocurrency and potential liabilities related to asset loss.
Bank Responsibilities
According to the document, banks are responsible for the actions of sub-custodians they engage for crypto custody. Banks must implement effective audit programs that consider the specific nuances related to cryptocurrency management.
Future Prospects for Banks in Crypto
Despite the risks, some banks are exploring opportunities in the crypto industry, especially in a more favorable regulatory environment. Previously stringent regulations are loosening, allowing banks to discuss joint crypto projects.
The publication of this document raises significant questions about the risks banks face in engaging with cryptocurrencies and highlights the need for careful assessment and preparation before entering this market.