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 covered crypto deposits are false in a fact sheet concerning deposit insurance and crypto enterprises published on Friday.
The agency claims 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, "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 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. https://t.co/059yrVwiiH pic.twitter.com/iSP2OZEO08July 29, 2022
“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 the deposit protection of its clients. Some of them had money with an FDIC-insured bank (the Metropolitan Commercial Bank).
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