The Federal Deposit Insurance Corporation (FDIC) said on Friday that it is concerned that consumers may be confused about the safety of their money when it is placed in crypto assets, especially in cases where companies offer an array of products. uninsured cryptographic products alongside insured bank deposit products.
In a new advisory, the FDIC said banks should ensure that the cryptocurrency companies they partner with do not overestimate the scope of deposit insurance. The move comes as widespread turmoil in the cryptocurrency market has led to the collapse of some high-profile companies, including one that regulators publicly chastised yesterday for overstating deposit insurance coverage.
“Inaccurate representations about deposit insurance by non-banks, including cryptocurrency companies, can confuse non-bank customers and mislead those customers into believing that they are protected against any type of loss,” the FDIC notice reads.
On Thursday, the FDIC and the Federal Reserve issued a cease and desist order against now-bankrupt cryptocurrency firm Voyager Digital, accusing the company of misleading customers by misleading them. believe that the funds invested in the brokerage firm would be guaranteed by the government.
Specifically, the FDIC said banks must make it clear to the public that deposit insurance only covers insured banks in the event of a collapse, and that this protection does not extend to the bankruptcy of any non-bank partner. which may include cryptocurrency custodians, exchanges, and wallet providers.