The FDIC says the public should note that deposit insurance does not cover non-bank entities and non-deposit products, including stocks and cryptocurrencies.
The Federal Deposit Insurance Corp (FDIC), an independent US agency that insures deposits and helps protect customers in case of given bank failures, has released a clarification message for crypto investors concerning its mandate.
In a fact sheet released on Friday about the FDIC deposit insurance and crypto companies, the agency warns the public that claims crypto deposits being insured are inaccurate.
Per the agency, some cryptocurrency platforms have “misrepresented” information concerning crypto products and their eligibility for FDIC deposit protection.
“These sorts of statements are inaccurate and can cause consumer confusion about deposit insurance and harm consumers under certain circumstances,” the Fact Sheet noted, making it clear that crypto isn’t FDIC-insured. Specifically, the deposit protection doesn’t cover failed non-bank entities, such as crypto companies.
The Fact Sheet also states that “deposit insurance does not protect consumers with non-deposit products such as stocks, bonds, mutual funds, securities, commodities, or crypto assets.”
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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/iSP2OZEO08
– FDIC (@FDICgov) July 29, 2022
Non-bank deposits and an insured bank’s products
An FDIC advisory also sought to clarify that while it offers depositor protection to insured banks’ customers, the same does not extend to a non-bank entity or the customers even if the entity offers products via a depository-insured bank.
“In dealings with crypto companies, FDIC-insured banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance,” read the advisory.
The FDIC’s message to the public follows developments with the bankrupt crypto lender Voyager Digital.
The crypto company, which had some customer deposits with an FDIC-insured bank (the Metropolitan Commercial Bank) has been asked not to misrepresent facts about deposit insurance to its customers.