The Federal Reserve Bank of Atlanta has issued a warning regarding the risks associated with blockchain technology and cryptocurrencies.
In a statement released on Monday, the Atlanta Fed advised banks and financial service providers to exercise caution when dealing with cryptocurrencies.
“Banks and financial service providers should implement systems to identify, monitor, and control risks,” the statement emphasized.
The Fed highlighted the importance for regulators overseeing banking to ensure the safety and soundness of credit unions and banks. “Each new partnership can introduce risk if not managed appropriately,” the Fed cautioned, emphasizing the need for vigilant risk management practices.
Furthermore, the Fed urged banks with complex payment systems, cryptocurrency activities, or blockchain operations to adhere to the Fed’s new Novel Actions Supervision Program.
Introduced in August 2023, this program aims to strengthen the Fed’s oversight of novel activities related to crypto-assets and distributed ledger technology conducted by banking organizations.
The warning comes amid a surge in the use of cryptocurrencies for illicit activities. According to a recent report by major bug bounty and security services platform Immunefi, hackers and fraudsters obtained approximately $127 million worth of cryptocurrencies across 19 specific incidents in January 2024 alone. This marked a significant increase from January 2023, which recorded losses of $21,021,800, and December 2023, which saw losses of $45,369,855.
In December, authorities in metro Atlanta issued an urgent warning following numerous reports of cryptocurrency scams targeting residents. The authorities highlighted a pump-and-dump scheme where instigators artificially inflate prices to entice unsuspecting investors.
The Georgia Secretary of State previously issued an investor alert cautioning against investment advertisements related to cryptocurrency, citing the substantial potential for fraud.
“We urge investors to exercise caution and be aware of the significant risk of fraud associated with these promotions,” the Secretary of State advised.
