Two senators are asking regulators about links between banks and cryptocurrency firms.
In letters sent Wednesday (Dec. 7) to the heads of the Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency, U.S. Sens. Elizabeth Warren and Tina Smith asked each agency how they assess the banking system’s exposure to crypto risks.
Noting the recent bankruptcy of FTX, Alameda Research and 130 affiliated firms, and those firms’ connections to banks, they wrote that the ties between crypto firms and the banking industry may be closer than was previously understood.
“Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access to banks,” the senators wrote.
They highlighted in the letter recent reports that Moonstone Bank, Deltec Bank, Silvergate Capital, Signature Bank and other banks have courted crypto customers and are now experiencing increased volatility.
In the letters, the senators asked the agencies if they plan to review crypto firms’ relationships with banks and to describe how they evaluate banks’ relationships with crypto firms and engagement in crypto-related activities.
They also asked them to name the banks they regulate that are currently engaged in crypto-related activities and to estimate the dollar value of those activities.
The senators also asked about the relationship between FTX, Alameda Research and Moonstone Bank.
In the letters, Warren and Smith requested the Fed, FDIC and OCC answer their questions by Dec. 21.
As PYMNTS reported Dec. 2, one of the more surprising assets to come to light during FTX’s bankruptcy is a small ownership stake, through Alameda Research — the sister trading arm of FTX — of Moonstone Bank, a tiny bank with three employees and a single branch in rural Washington state that was, pre-acquisition, once called Farmington State Bank.