The Federal Deposit Insurance Corporation (FDIC) expressed dismay with certain deposit insurance misrepresentations by some digital asset entities, which could impact users of different exchanges who want to feel safe about handing over custody of their funds amid recent happenings within the space.
Consequently, several digital currency exchanges, including FTX U.S., are assuring users of FDIC deposit insurance on their funds. In light of this, the independent agency recently issued cease-and-desist letters to five such exchanges. It noted that these deposit insurance claims are bogus and misleading.
“Based upon evidence collected by the FDIC, each of these companies made false representations—including on their websites and social media accounts—stating or suggesting that certain crypto-related products are FDIC–insured or that stocks held in brokerage accounts are FDIC–insured,” a press release said.
The press statement highlighted that the agency does not insure such digital assets. Additionally, the Federal Deposit Insurance (FDI) Act forbids anyone from claiming that uninsured products are FDIC-insured. Such claims could come from advertisements, press releases, company statements, or company names. It also bars any entity from intentionally exaggerating the extent of the insurance policy on a product.
The digital asset entities involved include FTX U.S., Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com. In addition to bogus deposit insurance claims, FDICCrypto.com appears to have registered a domain name that implies an alliance with the agency.
The FDIC order demands that the exchanges “take immediate corrective action to address these false or misleading statements.” Furthermore, it released a set of guidelines that customers can follow to ascertain the veracity of FDIC insurance claims. The agency noted that customers “can ask a representative of the institution, look for the FDIC sign at the institution, or use the FDIC’s BankFind tool.”
FDIC commits to busting insurance myths
This recent action is a testament to the FDIC’s commitment to busting insurance myths. In July, the agency released a fact sheet to help consumers tell truths from falsehoods regarding deposit insurance claims, a move necessary considering claims by digital asset firms on deposit insurance.
The FDIC’s insurance policies only cover deposits in banks insured by the agency, according to the fact sheet. It also noted that the agency does not insure deposits in non-bank institutions such as digital asset firms. The FDIC also pointed out that they do not cover financial products such as digital assets, stocks, and other securities or commodities.
Additionally, in April, the agency notified supervised institutions seeking exposure to digital assets, stating that such institutions should report their plans to the agency.
“The FDIC will review the information and provide relevant supervisory feedback,” the notification read.
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