This week, the U.S. central bank and the federal agency that insures U.S. depository institutions issued a series of notices addressing the applicability of federal deposit insurance to the cryptocurrency industry. The agencies published a joint letter demanding that a certain "crypto brokerage firm ... cease and desist from making false and misleading statements regarding its ... deposit insurance status and take immediate action to correct any such prior statements." According to a press release, the "crypto brokerage firm" made false and misleading statements suggesting that it was insured by federal deposit insurance and that customers of the crypto brokerage firm were insured against the firm's failure.
In another press release, the same two federal agencies issued an advisory – "Advisory to ... insured institutions Regarding Deposit Insurance and Dealings with Crypto Companies" – and published a related fact sheet. According to the press release, the federal deposit insurer "does not insure assets issued by non-bank entities, such as crypto companies." The press release notes that the advisory "reminds insured banks that they need to be aware of how [federal deposit] insurance operates and need to assess, manage, and control risks arising from third-party relationships, including those with crypto companies." The press release also advises U.S. banks that "[i]n dealings with crypto companies ... banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance." The advisory provides a list of risk management and governance considerations that banks should adhere to in their dealings with crypto companies. The advisory also makes clear that federal deposit insurance "does not protect a non-bank's customers against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, or other entities that appear to mimic banks but are not." The advisory and fact sheet also provide lists of additional resources for banks and crypto industry firms to consult on the topic of federal deposit insurance.
For more information, please refer to the following links:
- FDIC and Federal Reserve Board issue letter demanding Voyager Digital cease and desist from making false or misleading representations of deposit insurance status
- Advisory to FDIC-Insured Institutions Regarding Deposit Insurance and Dealings with Crypto Companies
- Advisory to FDIC-Insured Institutions Regarding FDIC Deposit Insurance and Dealings with Crypto Companies
- Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies
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