In a joint statement, the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said issuing and holding cryptocurrencies is "likely to be inconsistent with safe and sound banking practices."

FTX founder Sam Bankman-Fried pleaded not guilty to criminal charges Tuesday, a move that lays the foundation for one of the most high-profile white-collar fraud trials in recent years.

At the start of 2022, Biden administration officials were cautious about how to regulate the commingling of cryptocurrencies and traditional finance. By the end of the year, agencies had taken a tougher stance, and the downfall of FTX portended more of the same in 2023.

The FTX collapse and other recent disasters in the cryptocurrency space show that there is an urgent need for oversight. A self-regulatory body would get there fastest, while preserving the ethos of cryptocurrency.

Even as DeFi remains mostly unregulated, it offers no shield against the legal consequences of alleged fraud.

Federal agencies' complaints against FTX's leaders have led to scrutiny of the banks it worked with. While it's unlikely the bankers will be held accountable for the cryptocurrency exchange's wrongdoing, the case could make it more difficult any bank that wants to work with crypto-related businesses.

Sam Bankman-Fried has tried to suggest he didn't know what was happening at sister firm Alameda Research, which Caroline Ellison ran from Hong Kong while he was in the Bahamas. That casts his role in FTX's collapse as mismanagement rather than fraud. But Gary Wang, who was FTX's co-founder and based in the Bahamas with Bankman-Fried, doesn't fit into that picture.