The Federal Deposit Insurance Corporation (FDIC) has asked banks in the United States to communicate clear information regarding the insurance of cryptocurrency for its customers.
The regulator’s notice is coming on the heels of the recent crash of some cryptocurrency exchanges due to the market turmoil.
Earlier this week, the FDIC accused embattled crypto exchange, Voyager Digital of misleading its customers that their funds were insured by the government.
The FDIC in an advisory explained that there is a need to make sure customers know which of their funds are being insured by the government in case of collapse, and which have no safety net.
The advisory warned banks against misleading their customers regarding the safety of their investments deposited in cryptocurrency assets.
“Inaccurate representations about deposit insurance by non-banks, including crypto companies, may confuse the non-bank’s customers and cause those customers to mistakenly believe they are protected against any type of loss,” the FDIC advisory stated.
According to the FDIC, educating customers on which if their assets are insured allows them to know how covered they are, regarding protection, in the instances where firms go bankrupt.
Based on the content of the advisory, insurance protection given by the FDIC only covers banks that are insured, meaning that the FDIC is not liable to cryptocurrency exchanges, custodians, and wallet service providers in the case of a crash.