FTX USA and four other crypto firms are not insured, FDIC says

Five cryptocurrency companies have been served with a cease and desist letter from the Federal Deposit Insurance Corporation (FDIC). The letters have been sent over issues related to “false and misleading statements” regarding the companies insured by the FDIC. The companies that have been sent these letters are FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com.

FTX deletes tweets claiming FDIC coverage

The cease-and-desist letter requests that these companies take “immediate corrective action to address these false or misleading statements.” In the case of FTX US, the FDIC said the head of the exchange’s US arm Brett Harrison misled the public by claiming that funds bought and held through FTX were FDIC insured. The authorities requested that such tweets and statements be deleted. In response, Harrison deleted the tweet, saying it was not intended to mislead anyone.

FTX CEO Sam Bankman-Fried also commented on the matter, emphasizing that FTX does not have FDIC insurance. He further specified that the banks with which the center cooperates have the insurance. Bankman-Fried added that the exchange was interested in working with the FDIC to protect customers with individual accounts that use direct deposit.

There is no insurance for crypto companies

The FDIC has not yet insured any crypto companies. Many of the most popular exchanges have explicitly said they do not have FDIC insurance, including Coinbase and Gemini. In response to the latest action by the government agency, CryptoSec ​​has also removed a page that angered the FDIC. The FDIC had previously sent Voyager Digital, which was now insolvent, asking them to remove false and misleading statements. The agency has taken a strong stand in these matters recently and aims to impose authority on the market.

The bottom line

FDIC deposit insurance protects against losses for insured deposits. Banks in the US are usually FDIC insured and this gives them some confidence. An agency fact sheet cites: “Under federal law, the FDIC only insures deposits held in insured banks and savings associations (collectively, “insured banks”) and only in the unlikely event of an insured bank’s failure. The FDIC does not insure assets issued by nonbank entities , such as crypto companies.”

Over the past few months, the US has doubled down on crypto regulation and related issues. The United States Securities and Exchange Commission (SEC) has been taking action for some time now, and the latest action is just another step in that direction.