Crypto News: FDIC Cracking Down on Misleading Claims About Crypto Insurance

To put it mildly, the U.S. government and the crypto community have a tense relationship. Whether it's defining what constitutes a security as opposed to a commodity or what constitutes a free speech violation, the two rarely agree on distinct concepts. However, the latest cryptocurrency news reveals yet another rift between the two. The Federal Deposit Insurance Corporation (FDIC) is taking action against what it alleges are false statements about the degree of protection provided for investors' cryptocurrency.

The FDIC is a federal agency created to protect banks. Its purpose is to supervise banks by providing deposit insurance to FDIC member institutions. In the event that the bank itself fails, these insurances safeguard the customers' deposits. After the Great Depression, the FDIC was established in an effort to stop further bank failures. Checking and savings accounts, certificate of deposit accounts, and other deposits are covered by this insurance.

But the emergence of the cryptocurrency business is confusing the FDIC. This is due to the fact that many Americans are depositing money in numerous new locations that the FDIC was not designed to handle. These specifically include items like hot wallets and exchange custodial accounts. The agency is now consciously and clearly attempting to differentiate itself. It is specifically issuing a number of cease-and-desist orders today against various cryptocurrency websites.

Recently, orders were issued against five separate websites for making "false claims" regarding the connection between cryptocurrency and the FDIC. It is against the Federal Deposit Insurance Act to do this. FTX U.S. is one of these websites, along with four other crypto news publications that have reported that FTX U.S. is FDIC-insured.

FDIC's Cease-and-Desists Aren't a New Effort, According to Crypto News

The FDIC's crypto announcement from today isn't really breaking news. Actually, the government agency has been conducting a crackdown in the cryptocurrency industry for some time. These new orders are but a piece of a larger project.

The FDIC issued another cease-and-desist order against Voyager Digital earlier this month. Of course, Voyager Digital is one of many businesses that went out of business due to the recent crypto meltdown and was unable to repay several of its loans. The cease-and-desist, however, relates to a blog post that the business published in late 2019. Customers are informed in the message that cash will be secured by FDIC insurance in the event of bankruptcy. After filing for bankruptcy, the business revised its page to clarify that customers are covered for up to $250,000 in deposits.

The FDIC maintains that this is untrue and refers to the assertions as "false and misleading." The agency continues, "Customers who placed their monies with Voyager and do not have quick access to their cash relied upon the claims following Voyager's bankruptcy."

These cease-and-desist orders were issued shortly after the FDIC informed institutions covered by its insurance. The organization reminded these institutions that it does not insure stocks or assets issued by non-bank companies, such as cryptocurrency.

Of course, some pro-crypto officials are already furious with this approach toward the sector. For instance, Senator Pat Toomey is speaking out against the FDIC, claiming that the organization is trying to prevent banks from cooperating with crypto firms on purpose.