FDIC issues cease and desist letters to five entities, including FTX US

By: Michael Wilson

August 20, 2022 12:58 AM

The government body had previously declared that the FDIC does not provide insurance for deposits made with non-bank organizations, including cryptocurrency businesses.

Five businesses have received cease and desist letters from the Federal Deposit Insurance Corporation (FDIC) for allegedly making fraudulent claims about deposit insurance in relation to cryptocurrency.

The FDIC released cease and desist letters for the websites SmartAssets, FDICCrypto, Cryptonews, and Cryptosec in a press statement on Friday. The federal agency claims in the letters, which were released on Thursday, that these companies misled the public about certain cryptocurrency-related items being covered by FDIC.

The FDIC revealed in a press release on Friday that it has sent cease and desist letters to the websites SmartAssets, FDICCrypto, Cryptonews, and Cryptosec as well as the cryptocurrency exchange FTX US. The federal agency claims that these firms misled the public about some cryptocurrency-related products being insured by FDIC in the letters, which were released on Thursday.

Regarding claims that "some crypto-related items" are FDIC-insured or that "stocks stored in brokerage accounts are FDIC-insured," the FDIC stated that "these representations are inaccurate or misleading." The governing body said that these businesses needed to "take immediate corrective measures to remedy these incorrect or misleading statements" on their websites and social media pages.

The FDIC has been outspoken on the absence of insurance cover for non-banking entities, including businesses with a focus on cryptocurrencies. The government issued a notice in July informing American banks that they must evaluate and control risks when establishing third-party agreements with cryptocurrency service providers. The FDIC emphasized that while deposits at banks with insurance were secured against default up to a maximum of $250,000, there is no such protection for crypto companies.

The FDIC has been accused of taking an unnecessarily harsh stance to digital assets, even prohibiting banks from cooperating with crypto service providers.