The Federal Reserve Bank of Atlanta has raised warning over risks associated with blockchain and cryptos.
Per statement released Monday, the Atlanta Fed advised banks and financial service providers to exercise caution while dealing with cryptos.
“Banking organizations and their service providers should have systems to identify, monitor, and control risks,” the statement read.
The Fed noted that regulators overseeing banking should simultaneously assure the soundness and safety of credit score unions and banks.
“A banking organization can have multiple relationships, and each new partnership can introduce risk if not managed appropriately.”
Further, the Fed also stressed banks that have complex payment systems, crypto activity, or blockchain to follow the Feds new Novel Actions Supervision Program.
Announced in August 2023, this program aims to enhance the Fed’s supervision of novel activities, related to crypto-assets, distributed ledger technology (DLT), conducted by bank organizations.
Growing Crypto Use in Illicit Activities
The warning comes at a time when cryptos are becoming an increasingly popular tool for organized crime groups to conduct illicit activities. Per a latest report by major bug bounty and security services platform Immunefi, around $127 million worth cryptos went into the hands of hackers and fraudsters across 19 specific incidents in January 2024 alone.
This is a 6x increase from January 2023 losses to crypto scams amounting $21,021,800. It’s also a 2.8x increase from December 2023, which recorded losses of $45,369,855.
In December, police in metro Atlanta issued urgent warning after receiving a ton of reports about cryptocurrency scams targeting residents. Fed authorities noted a pump-and-dump scheme at the time where instigators are inflating the price and get everybody buying.
Georgia Secretary of State previously issued investor alert, warning about investment ads concerning cryptocurrency related investment and business opportunities.
“We urge investors to be wary of these promotions, and to be aware of the substantial potential for fraud.”
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