Female trader holding smartphone with CEX IO application running on phone

FDIC warns CEX.IO exchange against misleading insurance claims

The U.S. Federal Deposit Insurance Corporation (FDIC) has issued a warning to CEX.IO digital asset exchange over potentially misleading insurance claims.

The FDIC “has reason to believe that CEX.IO Corp. (“CEX”) has made false and misleading statements, directly or by implication, concerning CEX’s deposit insurance status,” the agency noted in its warning.

“We hereby demand that you cease and desist, and take immediate corrective action to address these false and misleading statements,” it said.

The Washington-based agency pointed to a statement on the CEX claiming that “U.S. dollars held in your CEX.IO fiat currency wallet are FDIC-insured up to $250,000 per account.”

“No qualifications, clarifications, or limitations are made in connection with this representation, and no insured depository institution or institutions (IDIs) are identified in connection with this statement,” the FDIC noted.

CEX has since then quietly removed the misleading statement from its website. In its place, it notes that “virtual currency and virtual currency transactions are not insured by any government agency. CEX.IO does not maintain any private virtual currency or cybersecurity insurance policy.”

The FDIC also sent warnings to two websites—Captain Altcoins and Bankless Times—that have also falsely posited that CEX is FDIC-insured.

The agency demanded that the statements be taken down from the CEX website, its app, advertising material, and the exchange’s social media accounts. If the exchange has pass-through insurance from placing its funds in FDIC-insured depository institutions, it must indicate this on its website and identify the institutions.

FDIC has long warned non-bank institutions against claiming to be insured by the agency. In light of 2022’s collapses by some of the biggest digital asset market players, it made several statements distancing itself from the industry.

“FDIC insurance does not protect against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, and neobanks,” its fact sheet in July 2022 stated.

Despite this, several VASPs have continued to mislead their users regarding the insurance of their assets. As CoinGeek recently reported, Gemini was one of the entities that lied to its uses, claiming its Earn account customers were covered by the agency.

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