US financial regulators have warned that banks should be more cautious on crypto contagion risks. 

In their first joint statement on cryptocurrencies and trading, the US Federal Reserve, Federal Deposit Insurance Corp (FDIC) and the Office of the Comptroller of the Currency (OCC) say they are concerned about the safety and soundness of bank business models that are highly concentrated in crypto-assets. 

The regulators say banks issuing or holding crypto tokens on public, decentralised networks are “highly likely” to be inconsistent with safe and sound banking practices. 

They say banks should be more careful about the risks of fraud, legal uncertainty and misleading disclosures by crypto firms. It is a poignant message coming in the wake of the collapse of crypto exchange FTX, which stunned the financial world late last year.

“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the regulators said.

The joint statement comes after banks themselves began expressing a desire for more clarity.