The cryptocurrency market which surged past $3 trillion market cap in November 2021, plunged back to $904 billion after two major crypto disasters in the year, namely the Terra-Luna and the FTX crash. Scammers were also on a rampage with investors being robbed $1 billion to crypto frauds in the year. Although central banks including India's Reserve Bank and others including China's have called for caution against cryptocurrencies, regulators in the US have finally broken their silence to issue a joint warning about the risks associated with crypto trading to banks across the country.
Financial institutions have been warned against potential fraud, lack of legal clarity, and misleading information from digital asset managers, along with a contagion risk from the crypto market. The US central bank and the Office of the Comptroller of the Currency are keeping a sharp eye on the movement of crypto at banks, after the volatility in the crypto space last year.
Auhorities also advised against holding crypto stored in public or decentralised networks, encouraging steps that prevent problems of the crypto market from spreading to the wider financial system. Even as FTX founder Sam Bankman Fried was arrested over missing investor funds after his exchange crashed, it was Binance founder Changpeng Zhao who lost the biggest chunk of his net worth to crypto crashes.
