The US Federal Deposit Insurance Corporation (FDIC) has sent a letter to OKCoin USA, Inc., demanding the cryptocurrency exchange take action to address false and misleading statements about its deposit insurance. The agency has also sent letters to Bodega Importadora de Pallets and Money Avenue LLC, making similar demands. The FDIC warned that certain statements could harm consumers and that it had observed an increasing number of instances online where firms or individuals had misused the FDIC’s name or logo or had made false or misleading representations about deposit insurance. FDIC Chairman Martin J. Gruenberg said such practices could confuse consumers about whether they are dealing with an insured institution and if they are protected by deposit insurance.
FDIC Warns Against Misleading Statements
The FDIC said OKCoin and its senior executives had made those misleading statements multiple times. For example, OKCoin said in a post that it was “licensed across the US with FDIC insurance on OKCoin accounts”. The agency also said the exchange’s chief marketing officer tweeted that an affiliated exchange offered FDIC insurance. The FDIC ordered the exchange to remove all statements that imply that OKCoin is FDIC-insured, that the FDIC has ever endorsed any particular blockchain, among other remedies. The exchange has been given 15 business days to send the FDIC written confirmation that it has complied with the requests.
FDIC Only Insures Deposits Held at Insured Banks and Savings Associations
The FDIC only insures deposits held at insured banks and savings associations, not at crypto companies, and can insure up to at least $250,000. In a July 2022 fact sheet, the agency also noted that deposit insurance does not apply to financial products such as stocks, bonds, commodities or crypto assets. The FDIC said in a related advisory last year that customer confusion could lead to legal risks for banks if a crypto company, or other third-party partner of an insured bank with whom they are dealing, makes misrepresentations about the nature and scope of deposit insurance.
FDIC’s Action to Protect Consumers and Ensure Transparency
The FDIC is taking action to protect consumers and ensure transparency in the financial sector. It is warning against the misuse of its name and logo and calling for accuracy in statements made about deposit insurance. The FDIC’s action against OKCoin USA, Inc. is a reminder to all financial institutions to be accurate and transparent in their communications with consumers. OKCoin USA, Inc. and other crypto companies must ensure that they are not making false or misleading statements about deposit insurance to avoid confusion and consumer harm.