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"Crypto-assets' pseudonymous nature can create heightened illicit finance risks," Michael Gibson, director of the Federal Reserve's Supervision and Regulation division, said on Tuesday. "As with all of their activities, banks engaging with the crypto-asset sector are expected to do so in a manner that is safe and sound." A focus of the Federal Reserve's recently created novel activities supervision program is on the supervision of risks posed by a number of technology-driven activities at banks that involve crypto assets, distributed ledger technology, and partnerships with nonbank fintechs. These activities do offer some upgrades to the banking sector (that is, lower costs, increased efficiencies and increased access to financial products and services), Gibson said in opening remarks prepared for a Digital Assets, Financial Technology and Inclusion Subcommittee hearing. But their are a slew of risks that must be manageable. "For example, banks with a high concentration in crypto-asset-related deposits may face heightened liquidity risks, given the significant volatility and interconnectedness in the sector, and should appropriately manage such risk," he said before the subcommittee. More on Crypto Regulation SEC charges Kraken for operating as unregistered crypto exchange Crypto exchange Gemini sued over $689M in 'preferential transfers' What does the Sam Bankman-Fried verdict mean for crypto markets?