The U.S. federal agency found a claim about deposit insurance in the fine print on the exchange’s website and on websites that reviewed it.
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The United States Federal Deposit Insurance Corporation (FDIC) has sent a letter to executives of cryptocurrency exchange CEX.IO warning them that they are potentially in violation of federal law due to false and misleading statements about the exchange’s insurance status. The agency has given the exchange 15 days to make corrections.
The statement in question is found in the small print details of the exchange’s state money transmitter license information. The information for Rhode Island reads, “U.S. dollars held in your CEX.IO fiat currency wallet 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 named. The letter, signed by FDIC assistant general counsel Seth Rosebrock, cites the Federal Deposit Insurance Act throughout. The letter clarifies:
“CEX is not FDIC-insured, and FDIC insurance does not protect cryptocurrency or any assets other than U.S. dollar deposits held at IDIs [insured depository institutions].”
The FDIC demanded that CEX.IO remove statements that imply it has FDIC insurance, cease and desist from making any statements to that effect, and clarify any statements relating to “pass-through insurance arising from the placement of funds in accounts at IDIs.”
Related: New York financial regulator investigates Gemini over FDIC claims: Report
The agency, which is an independent agency created by the U.S. Congress and financed by insurance dues, said that enforcement actions it might take include the issuance of cease-and-desist orders and the assessment of civil monetary 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 that claimed the exchange had FDIC insurance. It sent letters demanding analogous changes to those statements as well. One of the websites, Bankless Times, is based in the United Kingdom.
The FDIC’s insistence that crypto should not be insured has garnered praise from crypto skeptic Senator Elizabeth Warren. The agency was also one of the three signatories of a recent statement warning banks of the dangers of crypto.