The US banking regulator, the Federal Deposit Insurance Corporation (FDIC), has issued new advice to banks in an effort to reduce customer confusion regarding cryptocurrencies.
FDIC instructs banks to block confusing cryptocurrency claims related to deposit insurance
In its advisory published on July 29, the FDIC expressed concern that customers may be confused about how safe their money is when they invest in cryptocurrencies. According to the FDIC, the consultancy mainly targets companies that offer both uninsured crypto products and insured bank deposit products. The agency stresses that banks need to ensure that customers understand which funds to insure, especially in the event of a collapse.
According to the FDIC’s statements:
Misrepresentations about deposit insurance by non-bank entities, including crypto companies, can confuse non-bank customers and cause them to mistakenly believe they are protected against any loss.
Banks will follow crypto companies
Part of the new advisory requires banks to approve and monitor crypto companies. So they won’t be able to misrepresent the availability of deposit insurance. In such a case, the FDIC urges banks to take appropriate action to correct any misrepresentation. Additionally, the agency states that banks must have adequate risk management measures to ensure that services provided by third-party crypto companies are lawful.
The consultancy also asked to clear up any confusion regarding cryptocurrencies. He also drew attention to the importance of clear communication, which requires him to minimize confusion in advertisements. Such organizations have to convey to their customers risks such as the high price volatility of cryptocurrencies.
Meanwhile, the FDIC has previously required banks under its jurisdiction to engage in cryptocurrencies. He pointed out that these posed a risk to financial stability.
US focuses on crypto regulations
The latest message from the FDIC forms part of the US’s ongoing attempt to regulate the crypto industry. Notably, since Joe Biden signed the executive order on crypto development, several agencies have issued their respective opinions. Additionally, the bill approved by Wyoming Senator Cynthia Lummis aims to introduce comprehensive crypto regulations.
The pressure for crypto regulations has come with high-profile events such as the Terra ecosystem collapse. It then drove firms like the crypto lending platform Celsius into bankruptcy. Crypto-focused hedge fund Three Arrows Capital (3AC) is another company that went bankrupt. The hedge fund was unable to meet margin calls from its lenders. As you follow on Kriptokoin.com, 3AC no longer has Bitcoin and Ethereum to pay off its debts.
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