The United States Federal Trade Commission (FTC) has issued a formal warning to consumers, stating that deposits in cryptocurrencies do not come under the coverage of the Federal Deposit Insurance Corporation (FDIC). The FTC has explicitly mentioned that in the event of a crypto company’s insolvency, the government may not be bound by an obligation to recover consumers’ lost funds.
FTC’s Advisory on Cryptocurrency
On Thursday, the United States Federal Trade Commission disseminated a Consumer Alert, cautioning that cryptocurrency holdings are not insured by the FDIC. The FDIC is an autonomous federal entity responsible for insuring bank deposits, offered by its member institutions, up to an amount of $250,000 per individual account holder.
Cristina Miranda, the Consumer Education Specialist at the FTC, elaborated that FDIC insurance offers protection up to $250,000 in the event of a bank failure. Contrasting this with cryptocurrency-based financial service providers, she emphasized:
Deposits made in a cryptocurrency form with financial services companies are not insured by the FDIC, nor are they protected should the cryptocurrency company become insolvent.
Miranda also referenced the case of Voyager Digital LLC, a financial services firm dealing in cryptocurrencies. According to her, Voyager misled consumers by asserting that deposits made via their ‘Voyager App’ were FDIC-insured against any financial setbacks.
She further clarified, “Contrary to its assertions, Voyager never operated as an FDIC-insured financial institution. Additionally, FDIC insurance does not extend to cryptocurrency, also known as crypto assets. Consequently, when Voyager eventually filed for bankruptcy, account holders found themselves unable to access their funds, thereby incurring losses.”
The FTC reported that Voyager and its affiliated entities have consented to a permanent prohibition from offering, marketing, or promoting any products or services that could be utilized to deposit, exchange, invest, or withdraw any form of assets. In its advisory, the federal agency unequivocally stated:
It should be clearly understood that cryptocurrency deposits are not insured by the FDIC. In the event of any adverse circumstance, the government is under no obligation to intervene for the purpose of fund recovery.
Your thoughts on the FTC’s warning about the lack of FDIC insurance for cryptocurrency deposits are welcome. Please share your opinions in the comments section below.
Frequently Asked Questions (FAQs) about FTC Cryptocurrency Warning
What agency issued the warning about cryptocurrency deposits not being FDIC insured?
The United States Federal Trade Commission (FTC) issued the warning that cryptocurrency deposits are not covered by the Federal Deposit Insurance Corporation (FDIC).
Who is Cristina Miranda and what did she explain about FDIC insurance?
Cristina Miranda is the Consumer Education Specialist at the FTC. She elaborated that deposits in banks that are FDIC-insured are protected up to $250,000 per depositor in case the bank fails. However, she emphasized that this protection does not extend to deposits made with cryptocurrency-based financial service providers.
What was the case of Voyager Digital LLC cited for?
Voyager Digital LLC was cited as a case where the company misled consumers by claiming that deposits made through their ‘Voyager App’ were FDIC-insured. When the company eventually filed for bankruptcy, account holders lost access to their funds.
What are the repercussions for Voyager Digital LLC and its affiliates?
Voyager Digital LLC and its affiliated companies have agreed to a permanent ban on offering, marketing, or promoting any products or services that could be used to deposit, exchange, invest, or withdraw any form of assets.
What does the FTC advise consumers regarding crypto deposits?
The FTC explicitly advises consumers to understand that cryptocurrency deposits are not insured by the FDIC. In the event of insolvency of a crypto-based financial services provider, the government may not have an obligation to step in and help recover lost funds.
Does the FDIC insure any form of cryptocurrency?
No, the FDIC does not insure cryptocurrency or any other form of crypto assets. Its insurance is limited to deposits made in FDIC member institutions.
What is the maximum amount that the FDIC insures for bank deposits?
The FDIC insures bank deposits up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
In the event of a crypto company’s failure, is the government obligated to help consumers?
According to the FTC’s advisory, the government may not have an obligation to intervene and recover lost funds if a crypto company becomes insolvent.
More about FTC Cryptocurrency Warning
- [FTC Consumer Alert on Cryptocurrency]
- [FDIC Official Website]
- [Overview of Voyager Digital LLC Case]
- [U.S. Government’s Stance on Cryptocurrency]
- [Understanding FDIC Insurance]
- [Current State of Cryptocurrency Regulation]
- [Insolvency Risks in Cryptocurrency]