Reports said that the Federal Deposit Insurance Corporation (FDIC) has issued cease and desist letters to five companies for allegedly making false representations about deposit insurance related to cryptocurrencies.
It has been reported that FDIC issued a press release disclosing cease and desist letters for cryptocurrency exchange FTX US and websites SmartAssets, FDICCrypto, Cryptonews and Cryptosec. In the letters, which were issued on Thursday, the government agency alleges that these organizations misled the public about certain cryptocurrency-related products being insured by FDIC.
“These representations are false or misleading.”
However, the regulator said these companies must “take immediate corrective action to address these false or misleading statements” on their websites and social media accounts. The FDIC has been vocal about the lack of insurance protection for non-bank entities, which includes crypto-focused firms. In July, the regulator issued a notice advising banks in the United States that they need to assess and manage risks when forming third-party relationships with crypto service providers.
The report said that the FDIC reiterated that, while deposits at insured banks were protected against default for up to $250,000, no such coverage exists for crypto firms. It has been alleged that the FDIC has taken an overly harsh approach to digital assets, going as far as discouraging banks from dealing with crypto service providers. As reported, Pennsylvania Senator Pat Toomey, who also serves on the Senate Banking Committee, sent a letter to FDIC director and acting chairman Martin Gruenberg informing him of allegations made by a whistleblower.
Thus, in the letter, Toomey said he suspects that FDIC “may be improperly taking action to deter banks from doing business with lawful cryptocurrency-related (crypto-related) companies.”