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The Federal Deposit Insurance Corporation (FDIC) of the United States has released a statement warning the public that it "does not protect assets created by non-bank businesses, such as cryptocurrency companies."

The FDIC informed banks in the United States on Friday that they needed to evaluate and control risks in third-party connections with cryptocurrency companies. While deposits at insured banks were protected up to a maximum of $250,000, the government agency claimed that no such protections were available "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."

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The FDIC said that "some crypto companies have misrepresented to consumers that customers are FDIC-insured if the crypto company fails or that crypto items are eligible for FDIC deposit insurance coverage." These kinds of claims are false, and they may, in some cases, hurt consumers by confusing them about deposit insurance.

The warning came after a letter from the FDIC's enforcement section on Thursday, in which assistant general counsels Jason Gonzalez and Seth Rosebrock charged that cryptocurrency lender Voyager Digital had misrepresented insured deposits in "false and deceptive" ways. The legal team claimed that in the event of the demise of the company, neither Voyager clients nor cash placed to the platform would be insured by the FDIC.

"If a crypto firm or other third-party partner of an insured bank with which they are interacting misrepresents the nature and extent of deposit insurance, it may cause customer uncertainty and expose banks to legal problems. Additionally, false statements and customer uncertainty can prompt worried clients of insured banks to transfer money, posing a liquidity risk to the banks and, in turn, a possible earning and capital risk.

Why Crypto Assets Aren't Protected by the FDIC | Money

In 1934, the FDIC started covering deposits, initially with a cap of $2,500. Despite more than 9,000 of these establishments failing before 1940, the federal agency declared that since that time, no depositor had "lost a dime" in an FDIC-insured bank. Between 2001 and 2022, 561 insured banks failed, with the number peaked at 157 in 2010.

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