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The US banking regulator is urging banks that do business with cryptocurrency companies to make sure 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 on Friday that it is concerned that consumers may be confused about how safe their money can be when it is placed in crypto assets, especially in cases where firms offer a mix of uninsured crypto products alongside insured ones. bank deposit products.
In a new advisory, the FDIC said banks need to make sure the crypto firms they work with aren’t overestimating the reach of deposit insurance. The push comes at a time when widespread crypto market turmoil has led to the collapse of some high-profile firms, including one that was publicly chastised by regulators yesterday for overvaluing deposit insurance.
“Inaccurate representations about deposit insurance by non-bank entities, including crypto companies, may confuse non-bank customers and cause those customers to mistakenly believe that they are protected against any type of loss,” the FDIC advisory said.
On Thursday, the FDIC and the Federal Reserve issued a cease-and-desist order against now-bankrupt crypto firm Voyager Digital, accusing the company of misleading customers into believing that funds invested in the brokerage would be guaranteed by the government.
Specifically, the FDIC said banks must make it clear to the public that deposit insurance only applies to insured banks in the event of a collapse, and that the protection does not extend to the failure of any non-bank counterparties, which could include crypto custodians, exchanges and wallet providers.
