In a recent development, the U.S. Federal Deposit Insurance Corp. (FDIC) has ordered OKCoin, a prominent cryptocurrency exchange, to rectify misleading statements regarding the protection of its customers’ accounts. The FDIC, the U.S. banking regulator, criticized OKCoin for disseminating false information and demanded the immediate removal of these claims from the exchange’s website. Failure to comply could result in enforcement action for violating U.S. banking laws. This warning adds to the growing list of cautionary measures taken by the FDIC against crypto firms.
The FDIC’s cease-and-desist demand emphasizes that OKCoin is not covered by FDIC insurance and that the agency does not provide coverage for non-deposit products. The misleading statements in question failed to distinguish between U.S. dollar deposits and crypto assets, misleading customers into believing that FDIC insurance applied universally to their funds, including crypto assets.
The FDIC highlighted three instances of misleading representations made by OKCoin. Firstly, the exchange mentioned on its website that the Provenance Blockchain’s HASH token had received regulatory acceptance from the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve (FED), and the FDIC. Secondly, a 2020 post on the company’s website advertised OKCoin as “Licensed across the US with FDIC insurance on OKCoin accounts.” Lastly, an OKCoin official’s tweet claimed FDIC insurance coverage on USD deposits for U.S.-based users.
At the time of reporting, OKCoin had not responded to requests for comment from the CEO regarding the FDIC’s letter.
This is not the first time the FDIC has issued such orders. Previously, similar warnings were sent to Voyager Digital, which later filed for bankruptcy, and FTX.US. In the case of FTX.US, the then-CEO Brett Harrison had suggested on Twitter that the company was covered by the FDIC, prompting regulatory intervention. The FDIC has been firm in its position, cautioning that its protections solely apply to banks and not to crypto firms holding FDIC-insured bank accounts.
As OKCoin faces the repercussions of disseminating false information, it serves as a reminder to the cryptocurrency sector that regulatory compliance and accurate communication are crucial. Customers must remain vigilant and ensure they understand the level of protection provided by different platforms, especially when dealing with assets as unique as cryptocurrencies. The FDIC’s actions underline the need for transparency and accountability within the rapidly evolving crypto landscape.
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