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ARTICLE · 13 MARCH 2023

Crypto Liquidity Guidance Released By US Federal Banking Regulators

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In February 2023, the US federal banking regulators released guidance on liquidity risks associated with banks receiving certain types of funding from crypto-asset-related entities...

United StatesTechnology
Matthew Bisanz
Matthew Bisanz
Joseph A. Castelluccio
Joseph A. Castelluccio
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small>1 The Liquidity Guidance reemphasizes the skepticism that the federal banking regulators have expressed toward the crypto-asset sector and may make it even more difficult for crypto-asset-related entities to open bank accounts.

In this Legal Update, we provide background on liquidity risk and discuss what the Liquidity Guidance means for banks and the crypto sector.

Background

Liquidity is a bank's capacity to meet its cash and collateral obligations at a reasonable cost.2 Liquidity risk is the risk that a bank's financial condition or overall safety and soundness is adversely affected by an inability (or perceived inability) to meet its obligations. For some banks, there are quantitative liquidity risk management requirements, but all banks are expected to prudently manage their liquidity risk.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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