US financial institutions should take precautionary measures when dealing with cryptocurrencies as the market is experiencing a period of heightened volatility, The Wall Street Journal reports, referring to the Office of the Comptroller of the Currency's (OCC) statement to banks.
The top financial regulator said that many crypto businesses are unprepared for the stresses, adding that this lack of risk-management can result in "substantial losses" for clients.
"Most crypto market participants appear unprepared for the stresses and surprises that have taken place this year, resulting in substantial losses for millions of consumers," the OCC said.
The regulator also advised banks to reach out to regulators if they have any plans to store or invest in cryptocurrencies.
The OCC's call comes as the market is struggling to reclaim its lost ground after FTX went bankrupt and many companies collapsed. The US Federal Trade Commission is reportedly probing crypto businesses to find out if they had violated law by promoting services through deceptive or misleading advertisements.
The US Securities and Exchange Commission (SEC) alongside the Commodity Futures Trading Commission (CFTC) are also investigating FTX's relationships with Alameda Research, a trading firm also founded by Sam Bankman-Fried. The regulators want to find out if Bankman-Fried violated federal laws by transferring users' funds from the Bahamas-based crypto exchange to the Hong Kong-based trading firm.
