The United States Federal Deposit Insurance Corporation (FDIC) has sent a letter to executives at cryptocurrency exchange CEX.IO warning them that they are potentially violating federal law due to false and misleading statements about the insurance status of the exchange. The agency has given the exchange 15 days to make corrections.
The statement in question is found in the fine print of the state money transmitter license information. The information for Rhode Island reads: “US dollars in its CEX.IO fiat currency portfolio are FDIC insured up to $250,000 per account.”
The FDIC letter also noted that if the exchange has an FDIC-insured account, the insured depository institution holding the funds must be listed. The letter, signed by the FDIC’s deputy general counsel, Seth Rosebrock, cites at all times the Federal Deposit Insurance Law. The letter clarifies:
“CEX is not FDIC insured, and FDIC insurance does not protect cryptocurrencies or any other assets other than US dollar deposits held in IDIs [instituciones depositarias aseguradas]”.
The FDIC required CEX.IO to withdraw statements implying it has FDIC insurance, cease and desist from making any such statements, and clarify any statements related to “transfer insurance arising from the placement of funds in accounts in IDIs “.
The agency, which is an independent body created by the US Congress and funded by insurance premiums, said enforcement actions it could take include issuing cease and desist orders and imposing civil money penalties. .
Today, we issued letters demanding four entities stop making false and misleading statements about FDIC deposit insurance and to correct these falsehoods. Read more ➡️ https://t.co/TqdIZkD502. pic.twitter.com/K1qkUBjP0Z
—FDIC (@FDICgov) February 15, 2023
The FDIC also found two websites with reviews of CEX.IO stating that the exchange was FDIC insured. He also sent letters demanding similar changes to those claims. One of the websites, Bankless Times, is based in the UK.
The FDIC’s insistence that crypto should not be insured has drawn praise from the crypto-skeptical Senator; Elizabeth Warren. The agency was also one of three signatories to a recent statement warning banks of the dangers of cryptocurrencies.
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