Introduction

What You Need to Know About Crypto

What You Need to Know About Crypto

The following was released by the Federal Deposit Insurance Corporation (FDIC) on Friday, July 29, 2022.

BauerFinancial felt it was important enough to repeat in its entirety:

For Release

WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) today published the Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies

Recently, some crypto companies have misrepresented to consumers that crypto products are eligible for FDIC deposit insurance coverage or that customers are FDIC–insured if the crypto company fails. These sorts of statements are inaccurate and can cause consumer confusion about deposit insurance and harm consumers under certain circumstances. The Fact Sheet is intended to address some common and emerging misconceptions about deposit insurance coverage and its application.

FDIC deposit insurance protects bank depositors in the unlikely event that an FDIC–insured bank fails. In such an event, the FDIC insures each bank depositor up to at least $250,000. Since the FDIC began insuring deposits in 1934, no depositor has lost a penny of FDIC–insured funds as a result of a bank failure.

However, deposit insurance does not apply upon the failure of a non–bank, such as a crypto company. In addition, deposit insurance does not protect consumers with non–deposit products such as stocks, bonds, mutual funds, securities, commodities, or crypto assets.

With the release of this Fact Sheet, the FDIC issued a Financial Institution Letter (FIL) containing an Advisory to FDIC Institutions Regarding Deposit Insurance and Dealings with Crypto Companies. This Advisory is directed to FDIC insured banks dealing with crypto companies, reminding them to confirm and monitor that these companies do not misrepresent the availability of deposit insurance.

 

FACT SHEET

Fact Sheet: What the Public Needs to Know About
FDIC Deposit Insurance and Crypto Companies

Over the past several months, some crypto companies have suspended withdrawals or halted operations. In
some cases, these companies have represented to their customers that their products are eligible for FDIC
deposit insurance coverage, which may lead customers of these companies to believe, mistakenly, that their
money or investments are safe. The FDIC is concerned that some customers of crypto companies, such as
crypto custodians, exchanges, brokers, wallet providers, and neobanks may be confused about whether, and if
so, how, they may be covered by FDIC deposit insurance. This Fact Sheet is intended to address some
common misconceptions about the scope of deposit insurance coverage and whether deposit insurance applies
to funds that customers provide to these crypto companies. The FDIC is providing the information below to
assist the public in understanding FDIC deposit insurance coverage in light of recent market activity and
media reports.

FDIC Deposit Insurance Coverage

• By federal law, the FDIC only insures deposits held in insured banks and savings associations
(collectively, “insured banks”) and only in the unlikely event of an insured bank’s failure. The FDIC
does not insure assets issued by non-bank entities, such as crypto companies.

• Since the FDIC began insuring deposits in 1934, no depositor has lost a penny of FDIC-insured funds
as a result of an insured bank’s failure.

• Deposit insurance applies to products such as checking accounts, savings accounts, and certificates of
deposit held at insured banks. (https://www.fdic.gov/resources/deposit-insurance/financial-productsinsured/index.html)

• The FDIC only pays deposit insurance after an insured bank fails. Coverage is only available for the
deposits that are held in the insured bank at the time of its failure.

Products and Risks Not Covered by Deposit Insurance

• FDIC deposit insurance does not apply to financial products such as stocks, bonds, money market
mutual funds, other types of securities, commodities, or crypto assets.

• FDIC deposit insurance does not protect against losses due to theft or fraud, which are addressed by
other laws.

• FDIC insurance does not protect against the default, insolvency, or bankruptcy of any non-bank entity,
including crypto custodians, exchanges, brokers, wallet providers, and neobanks.

 

Additional Resources:

• The FDIC’s website provides more information to help consumers understand deposit insurance
coverage (https://www.fdic.gov/resources/deposit-insurance/).

• The FDIC’s “BankFind” tool can be used to determine whether an entity is an insured bank
(https://banks.data.fdic.gov/bankfind-suite/bankfind).

• The FDIC maintains a portal for submission of complaints about suspected misrepresentations
regarding deposit insurance
(https://ask.fdic.gov/fdicinformationandsupportcenter/s/fdicdimcomplaintform/?language=en_US).

• The FDIC’s regulations governing deposit insurance coverage are found at 12 C.F.R. Part 330
(https://www.ecfr.gov/current/title-12/chapter-III/subchapter-B/part-330).

• The FDIC’s Advisory to FDIC-Insured Institutions Regarding Deposit Insurance and Dealings with
Crypto Companies addresses risk management and governance considerations regarding
misrepresentations about FDIC deposit insurance by non-bank entities, including crypto companies,
and can be found at https://www.fdic.gov/news/financial-institution-letters/2022/fil22035.html.

 

About the FDIC:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.