The FDIC issued an advisory to banks today regarding what it says are misrepresentations by some cryptocurrency companies that their products are eligible for FDIC deposit insurance coverage or that customers are FDIC-insured if the crypto company fails.
“Over the past several months, some crypto companies have suspended withdrawals or halted operations. 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 said in the advisory. It added that in dealings with crypto companies, “FDIC-insured banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance.”
The FDIC also issued a two-page fact sheet reminding the public that the FDIC only insures deposits held in insured banks and savings associations and only in the event of an insured bank’s failure. The FDIC does not insure assets issued by non-bank entities, such as crypto companies.
The American Bankers Association supports the FDIC’s efforts to prohibit misrepresentations of deposit insurance by non-banks. The association has previously noted that the growing instances of misuse of the FDIC’s name or logo is of particular concern given the potential for significant consumer confusion and the reputational risk misrepresentation can pose to its members.