FDIC advises financial institutions and the public on crypto assets ⋆ ZyCrypto

[author

Legal victory for Ripple Nets in its quest to access SEC documents relating to the classification of crypto-assets as securities
Advertising


&nbsp

&nbsp

Liquidity issues at US cryptocurrency brokerage Digital Voyager led to the suspension of trading activities on its platforms in July 2022. The liquidity crunch originated from Singapore-based crypto hedge fund Three Arrows Capital ( 3AC), which defaulted on an approximately US$650 million loan to Voyager Digital.

Voyager Digital then made various representations on its website and social media platforms that its customers’ funds were insured by the United States Federal Deposit Insurance Corporation (FDIC). This prompted a series of actions from US regulators informing the public about crypto assets.

Pursuant to the July 28, 2022 Cease and Desist Letter to Voyager Digital, the FDIC and the Board of Governors of the United States Federal Reserve System have jointly directed Voyager Digital to “take immediate corrective action to remedy these false and misleading statements” within two business days.

The FDIC has issued a notice to FDIC-insured institutions about deposit insurance and dealing with crypto companies. The FDIC clarified the insured products: “FDIC deposit insurance covers deposit products offered by insured banks, such as checking accounts and savings accounts. Deposit insurance does not apply to products other than deposits, such as stocks, bonds, money market mutual funds, securities, commodities or crypto-assets”.

The notice further stated that “FDIC insurance does not protect against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, and neobanks”.

Advertising


&nbsp

&nbsp

The FDIC has instructed FDIC-insured institutions: “In their dealings with crypto companies, insured banks should confirm and monitor that such companies do not misrepresent the availability of deposit insurance in order to measure and control risk. for the bank, and must take appropriate measures to remedy these misrepresentations”.

In its advice to the general public, the FDIC also released a fact sheet on deposit insurance and crypto companies. The fact sheet stated, “The FDIC does not insure assets issued by non-bank entities, such as crypto companies.”

Regarding products covered by the FDIC, the fact sheet recalls that: “Deposit insurance applies to products such as checking accounts, savings accounts and certificates of deposit held with insured banks”.

While discussing risks not covered by the FDIC, the fact sheet stated that: “FDIC deposit insurance does not apply to financial products such as stocks, bonds, money market, other types of securities, commodities or crypto-assets”.

The recent failures of some crypto companies will only intensify calls for faster regulation and better public education about crypto assets.



Source link

Back to top button