A US banking regulator is urging banks dealing with cryptocurrency companies to ensure that customers know which of their funds will be insured by the government in the event of a collapse, and which have no safety net.
The Federal Deposit Insurance Corporation (FDIC) said Friday it is concerned that consumers could be confused about how safe their money might be when placed in crypto assets, particularly in cases where companies offer a mix of uninsured crypto products alongside insured bank deposit products.
In a new advisory, the FDIC said banks should ensure that crypto firms they partner with don’t exaggerate the scope of deposit insurance. The push comes as widespread turmoil in the crypto market has led to the collapse of a number of high-profile companies, including a regulator who was publicly sanctioned yesterday for exaggerating its deposit insurance coverage.
“Inaccurate statements about deposit insurance by non-banks, including crypto companies, can confuse non-bank customers and cause those customers to mistakenly believe they are protected from any type of loss,” the FDIC advisory said.
On Thursday, the FDIC and the Federal Reserve issued a shutdown order against the now-bankrupt crypto firm Voyager Digital, deceiving customers into believing that money invested in the brokerage would be guaranteed by the government.
Specifically, the FDIC said banks should make it clear to the public that deposit insurance only covers insured banks in the event of a collapse, and that protection does not extend to the failure of non-banking partners, including crypto custodians, exchanges and wallet providers. . .
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