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Amid concerns about risks to the broader financial system, U.S. banking regulators remain skeptical of banks’ involvement in the crypto sector.

U.S. regulators — including the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) — issued a joint statement on the risks to the banking sector from cryptoassets and their approach to regulating those exposures.

In the wake of increased volatility and turmoil — including the failure of large players such as FTX — the regulators said they “continue to take a careful and cautious approach” to banks’ crypto activities.

“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the statement said.

Given this concern, the regulators said they are “continuing to assess whether or how current and proposed crypto-asset-related activities by banking organizations can be conducted in a manner that adequately addresses safety and soundness, consumer protection, legal permissibility, and compliance with applicable laws and regulations.”

Specifically, the regulators said they currently believe that issuing cryptoassets or holding them as principal “is highly likely to be inconsistent with safe and sound banking practices.”

The agencies have “significant safety and soundness concerns” with business models that are heavily exposed to the crypto sector, it added.

“The agencies will continue to closely monitor crypto-asset-related exposures of banking organizations,” it said.