According to a report published by Cointelegraph, the Federal Deposit Insurance Corporation (FDIC) has warned that cryptocurrencies and related activities present significant risks to the United States banking system and require closer monitoring. In its annual risk review, the FDIC dedicated a section to digital assets, emphasizing the new and challenging nature of crypto-related risks.

The Aug. 14 Risk Review 2023 report comes after the FDIC noticed increasing interest in crypto activities among banks. The regulator has been observing the growing attention surrounding crypto through its customary supervision process, but it believes more information is needed due to heightened market volatility in 2022.

The FDIC argued that crypto-related activities pose "novel and complex risks to the U.S. banking system." Some of the main risk factors include uncertainty about the legal status of digital currencies, a high probability of fraud, and potential contagion or concentration due to the connected nature of crypto businesses.

The regulator also acknowledged the dynamic nature and rapid innovation of cryptocurrencies, which make risk assessment more challenging. The report flagged the run-risk susceptibility of stablecoins, warning that banks holding these assets could be exposed to deposit outflows.

This announcement comes in the wake of the March banking crisis during which Silicon Valley Bank, Silvergate Bank, and Signature Bank faced collapse or closure within a week. All three banks were known for providing services to the US crypto industry, and their setbacks caused considerable repercussions throughout the sector.

Cryptocurrencies' inherent risks have grabbed the attention of the FDIC, which has released a report emphasizing the necessity for closer supervision of digital assets. The FDIC highlights the potential threats that cryptocurrencies pose to US banks and underscores the challenges in assessing and mitigating these risks.