The United States Federal Deposit Insurance Corporation (FDIC) has sent a letter to executives of the cryptocurrency exchange CEX.IO warning them that they may be in violation of federal law due to false and misleading statements about the insurance status of the exchange. The agency gave the exchange 15 days to make corrections.
These statements are found in the small print details of the exchange’s state money transmitter license information. The information for Rhode Island reads, “US dollars held in your CEX.IO fiat currency wallet are FDIC insured up to $250,000 per account.”
The FDIC letter also notes that, if an 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 explains:
“CEX is not FDIC insured, and FDIC insurance does not protect cryptocurrencies or other assets other than US dollar deposits held at IDI. [insured depository institutions].”
The FDIC demanded that CEX.IO remove the statement that it has FDIC insurance, cease and desist from making any statement to that effect and clarify any statement related to “pass-through insurance arising from the placement of funds in accounts at IDI.”
Related: New York financial regulator investigates Gemini over FDIC claims: Report
The agency, which is an independent agency created by the US Congress and funded by insurance premiums, said possible enforcement actions include cease-and-desist orders and the assessment of civil monetary penalties.
Today, we issued a letter demanding that four entities stop making false and misleading statements about FDIC deposit insurance and correct the falsehoods. Read more ➡️ https://t.co/TqdIZkD502. pic.twitter.com/K1qkUBjP0Z
– FDIC (@FDICgov) February 15, 2023
The FDIC also found two websites with CEX.IO reviews that claimed the exchange had FDIC insurance. It sent a letter demanding similar changes to the statement. One such website, Bankless Times, is based in England.
The FDIC’s push to keep crypto uninsured has earned it praise from Sen. Elizabeth Warren is a crypto skeptic. The agency is also one of the three signatories of a new statement warning banks about the dangers of crypto.