The Federal Deposit Insurance Corporation or FDIC of the United States provided cryptocurrency investors and companies offering cryptocurrency products and services with important information last July 29, 2022.
We want our followers who are virtual currency investors and service providers to be guided by the laws of the United States and those of their countries in their endeavors.
We believe sharing this latest report about the Federal Deposit Insurance Corporation of the United States will keep them properly informed and able to conduct business legally, so we are posting it on our website.
Based on the update posted online by the legal information and news source JD Supra, the FDIC issued its Financial Institution Advisory Letter in late July.
In this document, the US deposit insurance agency informed the general public that it does not insure investment assets that non-banking institutions like cryptocurrency firms issue.
The asset – as in the virtual currency – is ineligible for deposit insurance even if offered via an FDIC-insured banking institution.
It is because the crypto-asset is issued directly by a cryptocurrency exchange, which is a non-bank entity.
According to the FDIC, besides crypto-assets, deposit insurance is inapplicable to other non-deposit offerings like commodities, stocks, securities, bonds, or money market mutual funds.
Moreover, FDIC insurance does not safeguard against the bankruptcy, insolvency, or default of cryptocurrency exchanges, cryptocurrency wallet providers, virtual currency custodians, and other non-banking entities.
The FDIC recommended that non-banking entities – such as the virtual currency exchanges advertising or offering FDIC-insured products in relationships with insured financial service providers – conspicuously and clearly state that they are not insured banking institutions.
These cryptocurrency exchanges should also identify the insured banking institutions where any client funds may be held on deposit.
Finally, the FDIC recommended that non-banking entities communicate to the investing public that cryptocurrencies are not FDIC-insured products and may lose their value.
The FDIC issued these guidelines to prevent customer harm and confusion. Its concern arose from the recent cryptocurrency market turmoil that led to some cryptocurrency companies halting their operations or suspending customer withdrawals.
The FDIC is a government corporation in the United States. It supplies deposit insurance to US savings and commercial banks’ depositors.
Furthermore, the FDIC insures deposit products like savings and checking accounts that insured banks offer for up to US$250,000 if an insured banking institution fails.
We appreciate the FDIC’s recent release of its Financial Institution Advisory Letter. We agree that such a notice is very important as it highlights the FDIC’s care and responsibility to the consumers.
We are well aware that many investors have been scammed over the years. Many of these unwitting victims wrongfully believed that the investment assets cryptocurrency firms offered to them were safeguarded by FDIC deposit insurance coverage.
We urge our followers to pay attention to the FDIC’s latest advisory because it is for their protection as investors against any harm that may arise from their virtual asset investments.