The Federal Deposit Insurance Corporation (FDIC) has demanded that crypto exchange OKCoin cease its misleading claims regarding being insured. Under the Federal Deposit Insurance Act, it is explicitly illegal to misrepresent uninsured deposits as insured or provide false information about coverage.
The FDIC, in a letter addressed to OKCoin CEO Hong Fang, highlighted three specific instances where the exchange was accused of making false claims. The agency holds the authority to issue cease-and-desist orders and impose civil penalties for violations of such nature.
The FDIC’s demand emphasizes that OKCoin is not FDIC-insured and that the agency does not provide insurance coverage for non-deposit products. The agency expressed concern over OKCoin’s failure to differentiate between U.S. dollar deposits and crypto assets, thereby creating an impression that FDIC insurance coverage applies to all customer funds, including crypto assets.
Three examples of “false and misleading representations” were cited by the agency. These include a statement on OKCoin’s website claiming that Provenance Blockchain’s HASH token had received regulatory acceptance from the SEC, OCC, FED, and the FDIC. Additionally, a 2020 post on the company’s website advertised itself as “Licensed across the US with FDIC insurance on OKCoin accounts.” Furthermore, a Twitter post by a company official stated, “if you are in the US, we offer FDIC insurance on USD deposits.” The FDIC unequivocally asserted that OKCoin is not FDIC-insured and that the agency does not provide insurance for non-deposit products.
Furthermore, the FDIC emphasized that it does not endorse or support any specific blockchains, thereby debunking any misconceptions or false implications made by OKCoin.
In response to the FDIC’s statements, an OKCoin spokesperson informed Blockworks that the platform is aware of the matter and is taking action to assess the FDIC’s concerns. The spokesperson reiterated OKCoin’s commitment to respecting applicable laws and regulations and expressed a willingness to collaborate with stakeholders, including regulators.
It is worth noting that this is not an isolated incident, as several other companies, including Voyager and FTX US, have previously received cease-and-desist letters from the FDIC. These actions from the FDIC underscore the importance of accurate and transparent communication in the cryptocurrency industry, particularly regarding insurance coverage and regulatory compliance.
As the crypto market continues to evolve and gain mainstream attention, it becomes crucial for exchanges and other industry participants to adhere to regulatory guidelines and provide clear and accurate information to their users. The FDIC’s intervention serves as a reminder that misleading claims can have serious consequences and emphasizes the need for responsible practices within the cryptocurrency ecosystem.
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