2023 Risk Review | 71

SECTION 6

Crypto-Asset Risk

• The crypto-asset sector experienced significant market volatility in 2022.

• Crypto-asset-related activities can pose novel and complex risks to the U.S. banking system that are 

difficult to fully assess.

• The FDIC, in coordination with the other federal banking agencies, has taken steps to closely monitor 

crypto-asset-related activities of banking organizations.

120 The Financial Stability Oversight Council’s report on digital assets describes crypto-assets as private sector digital assets that depend primarily on the use of 

cryptography and distributed ledger or similar technologies, Report on Digital Asset Financial Stability Risks and Regulation 2022.

121 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, Joint Statement on 

Crypto-Asset Risks to Banking Organizations, January 3, 2023.

122 Federal Deposit Insurance Corporation, Notification and Supervisory Feedback Procedures for FDIC-Supervised Institutions Engaging in Crypto-Related 

Activities, FIL-16-2022, April 7, 2022.  

The crypto-asset sector experienced significant 

market volatility in 2022, exposing several 

vulnerabilities. In 2022, growth in the crypto-asset 

industry corresponded with an increasing interest by 

some banks to engage in crypto-asset activities.  

Crypto-assets present novel and complex risks that 

are difficult to fully assess.120 Part of the difficulty in 

assessing these risks arises from the dynamic nature of 

crypto-assets, the crypto marketplace, and the rapid 

pace of innovation. Some of the key risks associated 

with crypto-assets and crypto-asset sector participants 

include those related to fraud, legal uncertainties, 

misleading or inaccurate representations and 

disclosures, risk management practices exhibiting 

a lack of maturity and robustness, and platform 

and other operational vulnerabilities. Possible 

contagion risk within the crypto-asset sector resulting 

from interconnections among certain crypto-asset 

participants may present concentration risks for banks 

with exposure to the crypto-asset sector. Susceptibility 

of stablecoins to run risk can create the potential 

for deposit outflows for banks that hold stablecoin 

reserves.121

The FDIC and other banking regulators have taken 

several steps in light of these emerging risks.

The FDIC has generally been aware of some banks’ 

interest in crypto-asset-related activities through its 

normal supervision process. However, as this interest 

has accelerated, the FDIC determined that more 

information was needed to better understand the 

risks associated with these activities. Hence in April 

2022, the FDIC issued Financial Institution Letter (FIL) 

016-2022, which asks FDIC-supervised institutions to 

notify the FDIC of the crypto-related activities in which 

they are engaged in or intend to engage in.122 This 

FIL notes various crypto-related activities, including 

acting as crypto-asset custodians; maintaining 

stablecoin reserves; issuing crypto and other digital 

assets; acting as market makers or exchange or 

redemption agents; participating in blockchain and 

distributed ledger-based settlement or payment 

systems, including performing node functions; and 

related activities such as finder activities and lending. 

This list is not all inclusive and does not mean that the 

activity is permissible for FDIC-supervised institutions. 

These institutions were asked to provide necessary 

information that would allow the FDIC to assess the 

safety and soundness, consumer protection, and 

financial stability implications of such activities. 

While not specific to crypto-assets, the FDIC finalized 

a rule on May 17, 2022, to help address instances in 

which firms misrepresent the availability of deposit 

insurance in violation of the law. On July 29, 2022, 

the FDIC issued a fact sheet to the public on FDIC 

deposit insurance and crypto companies and an 
72 | 2023 Risk Review

advisory to FDIC-insured institutions on deposit 

insurance and dealings with crypto companies.123

Both documents address risks, concerns, and risk 

management and governance considerations related 

to misrepresentations and misconceptions about 

deposit insurance coverage in the context of cryptoassets. Since 2022, the FDIC has taken action against 

more than 85 entities that were misrepresenting the 

nature, extent, or availability of deposit insurance. 

In some instances, these firms had made misleading 

claims in connection with crypto-assets.124 For 

example, on August 19, 2022, the FDIC issued letters 

to five companies that had made false representations 

stating or implying that crypto-assets were eligible 

for FDIC insurance, demanding that they and their 

officers, directors, and employees cease and desist 

from making false and misleading statements about 

FDIC deposit insurance.125 Also, on December 13, 2022, 

the FDIC Board of Directors issued for public comment 

a proposed rule to amend its regulations on use of 

the official FDIC sign and to clarify the FDIC regulation 

regarding misrepresentations of deposit insurance.126 

More recently in January 2023, the FDIC, the Federal 

Reserve, and the Office of the Comptroller of the 

Currency (OCC) released a joint statement on 

crypto-asset risks to banking organizations.127 The 

statement reminds banking organizations that they 

should ensure that crypto-asset-related activities 

can be performed in a safe and sound manner, are 

legally permissible, and comply with applicable 

laws and regulations, including those designed to 

protect consumers (such as fair lending laws and 

123 Federal Deposit Insurance Corporation, Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies, July 28, 2022; and 

Advisory to FDIC-Insured Institutions Regarding FDIC Deposit Insurance Coverage and Dealings with Crypto Companies, FIL-35, 2022, July 29, 2022. 

124 Federal Deposit Insurance Corporation, Remarks by Chairman Martin J. Gruenberg at the Cities for Financial Empowerment Fund 2023 Bank On National 

Conference, May 23, 2023.

125 Federal Deposit Insurance Corporation, “FDIC Issues Cease and Desist Letters to Five Companies for Making Crypto-Related False or Misleading 

Representations about Deposit Insurance,” news release, August 19, 2022. 

126 Federal Deposit Insurance Corporation, FDIC Official Sign and Advertising Requirements, False Advertising, Misrepresentation of Insured Status, and Misuse of 

the FDIC’s Name or Logo, 87 Fed. Reg.78017–78037 (Dec. 21, 2022); and Notice of Proposal on FDIC Official Sign and Advertising Requirements, False Advertising, 

Misrepresentation of Insured Status, and Misuse of the FDIC’s Name or Logo, FIL-52-2022, December 13, 2022. 

127 Joint Statement on Crypto-Asset Risks to Banking Organizations, January 3, 2023. 

128 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, Joint Statement on 

Liquidity Risks to Banking Organizations Resulting From Crypto-Asset Market Vulnerabilities, February 23, 2023.

prohibitions against unfair, deceptive, or abusive 

acts or practices). Also, in February 2023, the FDIC, 

Federal Reserve, and OCC issued a Joint Statement 

on Liquidity Risks to Banking Organizations Resulting 

from Crypto-Asset Market Vulnerabilities on the 

liquidity risks to banking organizations presented by 

certain sources of funding from crypto-asset-related 

entities.128 This statement highlights key liquidity risks 

associated with crypto-assets and crypto-asset sector 

participants that banking organizations should be 

aware of. In particular, certain sources of funding from 

crypto-asset-related entities may pose heightened 

liquidity risks to banking organizations due to the 

unpredictability of the scale and timing of deposit 

inflows and outflows. The statement reminds banking 

organizations to apply existing risk management 

principles and provides examples of practices that 

could be effective. The agencies also continue to 

emphasize that banking organizations are neither 

prohibited nor discouraged from providing banking 

services to customers of any specific class or type, as 

permitted by law or regulation. 

The FDIC, in coordination with the other federal 

banking agencies, continues to closely monitor cryptoasset-related exposures of banking organizations. As 

warranted, the FDIC will issue additional statements 

related to engagement by banking organizations in 

crypto-asset-related activities. The FDIC also has 

developed processes to engage in robust supervisory 

discussions with banking organizations regarding 

proposed and existing crypto-asset-related activities.