Senators question U.S. banking regulators on crypto exposure

Quick Take

  • Senators Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., want details from the Federal Reserve and other federal regulators on U.S. banks’ exposure to cryptocurrencies.
  • Questions include Alameda Research’s investment in Washington state-based Moonstone Bank.

Two U.S senators have written to agencies tasked with supervising the financial sector to seek details about banks' exposure to cryptocurrencies.

Sens. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., also want answers on how Sam Bankman-Fried's Alameda Research was reportedly able to buy Washington state-based Moonstone Bank. 

''While the banking system has so far been relatively unscathed by the latest crypto crash, FTX's collapse shows that crypto may be more integrated into the banking system than regulators are aware,'' the letters said. 

The nearly identical letters, dated Dec. 7., were sent to Federal Reserve Chairman Jerome Powell, Federal Deposit Insurance Corporation Acting Chair Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu. 

The letters ask the agency heads nine questions including about plans to review crypto firms' relationships with banks. The senators also want a detailed list of banks that provide cryptocurrency custody services, hold dollar deposits for crypto firms, provide loans and facilitate stablecoin transactions for crypto firms. 

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The two senators, who sit on the Senate Banking Committee that recently scheduled a hearing on FTX, also want information on how Alameda was able to acquire Moonstone Bank and whether that transaction was reviewed by the Federal Reserve. Alameda invested $11.5 million into Moonstone, more than double the bank's worth at the time, the senators wrote, citing a New York Times report on the transaction. 

Silvergate Capital, Provident Ba