FDIC censures crypto companies over false statements
The regulator has demanded the websites remove references to federal insurance for crypto trading
- Written by Banking Exchange staff
The Federal Deposit Insurance Corporation (FDIC) has written to five cryptocurrency-related companies over “false and misleading statements” that suggest traders are covered by federal insurance.
The FDIC wrote to the companies last week demanding “immediate corrective action”. All five have made changes since the letters were sent.
The companies include a Pennsylvania-based firm that registered the domain name fdiccrypto.com, which the FDIC said amounted to “false representations” that users of its services were covered by the corporation’s depositary insurance function.
Chicago-based FTX US, Bahamas-registered Cryptonews.com, New York-headquartered SmartAsset, and the Cryptosec.info website were all issued with ‘cease and desist’ letters by the FDIC. Some of the sites had incorrectly listed cryptocurrency and crypto-asset exchanges as being federally insured.
As of August 22, all five sites have acted on the FDIC’s request. Four have removed references to the FDIC, while Cryptosec.info’s site states that an article flagged by the regulator “was temporarily scrapped in compliance with the FDIC”.
A growing number of banks are exploring how to facilitate or incorporate digital asset trading as these become more popular, while regulators and policymakers are working to bring this growing industry under regulation.
The Securities and Exchange Commission rebranded and significantly expanded its digital finance oversight unit in May. The Crypto Assets and Cyber Unit oversees investor protection and securities law related to areas such as crypto asset offerings and exchanges, decentralized finance, non-fungible tokens, and stablecoins.
In June, two senators introduced planned legislation designed to properly regulate digital assets with the aim of encouraging responsible and transparent financial development and provide consumers with necessary protections when investing in cryptocurrencies or digital assets such as non-fungible tokens.
Earlier this year, the Financial Stability Board warned in a report that cryptocurrencies and other digital assets could become a threat to global financial stability due to their “scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system”.
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