FDIC warns CEX.IO and its reviewers to remove potentially false claims about insurance

The US Federal Deposit Insurance Corporation (FDIC) sent a letter to the management of the CEX.IO cryptocurrency exchange warning them that they are potentially violating federal law by making false and misleading claims about the insurance status of the exchange. The agency gave the exchange 15 days to make corrections.

The statement in question is contained in the fine print details of the exchange’s state money transfer license information. Information about Rhode Island is reading“US dollars held in your CEX.IO fiat wallet are FDIC insured for up to $250,000 per account.”

The FDIC letter also noted that if an exchange has an FDIC insured account, it must list the insured depository institution where the funds are held. The letter, signed by FDIC Assistant General Counsel Seth Rosebrock, mentions the Federal Deposit Insurance Act throughout. The letter explains:

“CEX is not insured by the FDIC, and FDIC insurance does not protect cryptocurrencies or any assets other than USD deposits held in IDI. [insured depository institutions]”.

The FDIC has requested that CEX.IO remove statements that imply that it has FDIC insurance, cease and desist from making any statement to that effect, and clarify any statements relating to “pass-through insurance arising from the placement of funds in IDI accounts. “.

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The agency, which is an independent agency created by the US Congress and funded by insurance premiums, said the enforcement action it can take includes issuing cease-and-desist orders and imposing civil monetary penalties.

The FDIC also uncovered two CEX.IO review websites claiming that the exchange was FDIC insured. This sent letters demanding similar changes to these statements. One of the websites, Bankless Times, based on in the United Kingdom.

The FDIC’s insistence that cryptocurrencies should not be hedged has received praise from crypto-skeptic Senator Elizabeth Warren. The agency was also one of three signatories to a recent statement warning banks about the dangers of cryptocurrencies.

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