Tuesday, August 16, 2022

FDIC Does Not Cover Crypto Deposits: FDIC Fact Sheet

The Takeaway:

The FDIC warns the general public that non-bank organizations and non-deposit items, such as stocks and cryptocurrencies, are not covered by deposit insurance.

An explanation of the Federal Deposit Insurance Corp.’s (FDIC) mandate has been made available to cryptocurrency investors by the independent US agency, which protects deposits and aids in client protection in the event of specific bank failures.

The FDIC advises the public that claims that crypto deposits are covered are false in a fact sheet concerning deposit insurance and crypto enterprises that was published on Friday.

The agency claims that several cryptocurrency platforms “misrepresented” details about cryptocurrency products and their eligibility for FDIC deposit insurance.

The Fact Sheet made it plain that cryptocurrency is not FDIC-insured, stating that “These kinds of assertions are false and might cause consumer confusion about deposit protection and harm customers under certain circumstances.” Particularly, bankrupt non-bank organizations like cryptocurrency firms are not covered by the deposit protection.

Deposit insurance “does not protect clients with non-deposit items such as stocks, bonds, mutual funds, securities, commodities, or crypto assets,” the Fact Sheet further reads.

“In good and bad financial times, one thing remains the same: your money up to $250,000 is protected at FDIC-insured financial institutions. Since 1934, no FDIC-insured depositor has lost a penny of their insured funds.”

Non-bank Deposits and the Goods Offered by an Insured Bank

According to an FDIC recommendation, even if a non-bank entity offers products through a depository-insured bank, the entity’s consumers are not covered by the depositor protection it provides to insured banks’ customers.

“FDIC-insured banks should check and monitor that these entities do not misrepresent the existence of deposit protection in their dealings with crypto enterprises,” the advice stated.

The FDIC’s public announcement comes in response to revelations involving the defunct crypto lender Voyager Digital.

The crypto company has been instructed not to mislead information concerning deposit protection to its clients, some of whom had money with an FDIC-insured bank (the Metropolitan Commercial Bank).

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Vivekanandan Tiwari
Vivekanandan Tiwari
Vivekanandan is an IT graduate, He loves to write about blockchain-related techs. He is enthusiastic about Financial markets and is always eager to learn.

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