FDIC Introduces New Rules to Tackle Misleading Advertising by Crypto Firms
Summary:
The US Federal Deposit Insurance Corporation (FDIC) has implemented a new rule to combat misleading advertising and misuse of the FDIC's name or emblem. This follows instances where certain cryptocurrency firms implied their funds are FDIC-insured. As part of the regulation, from 2025, institutions insured by FDIC should display a distinctive black and navy blue sign across various platforms. The move is seen as critical given recent collapses of banks linked to crypto firms, underlining the need for clarifying public understanding about what is FDIC-insured.
In a significant move that could impact how certain cryptocurrency firms are perceived, the Federal Deposit Insurance Corporation (FDIC) in the U.S has laid down a new rule regarding the usage of its official signs and advertisements. As disclosed on December 20, the FDIC's board of directors has put in place a regulation meant to combat misleading advertising, false representation of deposit insurance coverage, and improper use of FDIC's name or emblem. From 2025, institutions insured by the FDIC ought to present a black and navy blue sign, in contrast to the gold and black sign first introduced in the 1930s. This is to be displayed on all websites, mobile apps, physical bank premises, and select ATMs.
The last considerable update to signs and advertisement rules by the FDIC was back in 2006. This new regulation is intended to deter institutions from wrongly implying that their funds are FDIC-insured. According to Dennis Kelleher, the President and CEO of the charitable organization Better Markets, while this rule isn't limited to cryptocurrency firms, abuse from the industry has been prevalent, necessitating several corrective actions by the FDIC. Numerous crypto companies, such as Gemini Earn, FTX US, and Voyager Digital have allegedly misled investors into believing their investments were FDIC-secured.
In 2023, a number of banks with cryptocurrency connections either collapsed voluntarily, were forced to shut down by authorities, or went bankrupt - this prompted legislators to discuss ways of safeguarding user funds. The FDIC cooperated with the New York State Department of Financial Service to terminate Signature Bank. In March, Silicon Valley Bank, holding deposits from stablecoin provider Circle and VC firm Sequoia Capital, collapsed but was FDIC-protected. The FDIC usually insures up to $250,000 per depositor.
Meanwhile, the Consumer Financial Protection Bureau warned in June that cryptocurrency transactions via payment apps might not necessarily be FDIC-insured, potentially exposing funds to risk. FDIC has also identified cryptocurrency activities as presenting "novel and intricate risks" to U.S. banks due to their uncertain legal and regulatory status.
Published At
12/21/2023 12:33:07 AM
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