The United States Federal Deposit Insurance Corporation (FDIC) has issued a stringent demand to OKCoin, a significant player in the cryptocurrency exchange market. The warning instructs OKCoin to immediately correct the misleading assertions on their website, which implies that their customer accounts are safeguarded under the FDIC’s insurance coverage.
OKCoin: A Breach of U.S. Banking Laws?
The FDIC alleges that OKCoin USA Inc., a sister exchange to OKX headquartered in San Francisco, has violated U.S. banking laws by making false claims about FDIC insurance. Unless these inaccuracies are promptly rectified, the company might face punitive enforcement action.
The banking regulator’s warning is the most recent among several similar cautions to cryptocurrency firms. These actions suggest an increased scrutiny on the growing crypto industry’s adherence to established banking regulations.
In the official cease-and-desist order, the FDIC clarified that OKCoin is not covered by their insurance. They stressed that the FDIC’s protection does not extend to non-deposit products. OKCoin’s false representation of FDIC insurance to cover all customer funds, including crypto assets, is a gross misunderstanding that the regulator vehemently objects.
The FDIC’s Illustration: Three Misrepresentations by OKCoin
The FDIC highlighted three misleading assertions made by OKCoin. One of these was a statement on its website asserting the Provenance Blockchain’s HASH token on OKCoin had received extensive regulatory approval from agencies such as the SEC, OCC, FED, and the FDIC. The second misleading claim came in a 2020 post on the company’s website, where OKCoin advertised itself as “licensed across the U.S. with FDIC insurance on OKCoin accounts”. The third example was a Twitter post from a company official claiming FDIC insurance on USD deposits for U.S. customers.
It is not the first time the FDIC has issued such orders to cryptocurrency firms. It had sent similar notifications to now-defunct Voyager Digital and FTX.US, following a tweet from former CEO Brett Harrison implying FDIC coverage. The FDIC has also warned the crypto industry that FDIC protections are strictly intended for banks, not cryptocurrency firms with FDIC-insured bank accounts.
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