FDIC clarifies non-bank entities and crypto firms not covered by insurance
FDIC issues a crypto advisory to clarify the scope of its deposit insurance.
Sun, 31 Jul 2022, 17:22 pm UTC
The Federal Deposit Insurance Corporation (FDIC) recently issued an advisory that clarified the scope of its insurance. The agency stressed that while it insures deposits held in insured banks, the coverage does not include deposits or investments held by non-bank entities including crypto firms.
The FDIC issued the advisory to clarify the scope of its deposit insurance. Apparently, some crypto firms were making claims that the products they offer are insured by the agency, which led customers to believe that the funds they placed with the crypto firms are safe.
“Over the past several months, some crypto companies have suspended withdrawals or halted operations,” the FDID wrote in the advisory. “In some cases, these companies have represented to their customers that their products are eligible for FDIC deposit insurance coverage, which may lead customers to believe, mistakenly, that their money or investments are safe.”
The agency further reminded the public that its insurance does not cover crypto firms and non-bank companies. “By federal law, the FDIC only insures deposits held in insured banks and savings associations (collectively, “insured banks”) in the unlikely event of an insured bank’s failure,” the agency added. “The FDIC does not insure assets issued by non-bank entities, such as crypto companies.”
The agency recommended that insured banks should monitor the crypto firms that they have dealings with. “In their dealings with crypto companies, insured banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance in order to measure and control risks to the bank, and should take appropriate action to address such misrepresentations,” the FDIC wrote.
The FDIC also suggested that insured banks regularly monitor and review the marketing materials and related disclosures of non-bank entities that they deal with to help minimize customer confusion. “For safe and sound operation, the insured bank should have appropriate risk management policies and processes to ensure that any services provided by, or deposits received from any third-party, including a crypto company, are, and remain, in compliance with all laws and regulations,” it added.
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