FDIC Targets Crypto Exchange OKCoin Over ‘False’ Insurance Assertions

The U.S. banking regulator, the Federal Deposit Insurance Corporation (FDIC), has issued a stern warning to cryptocurrency exchange OKCoin over “false and misleading statements” on its website and promotional channels.

In a June 15 letter, the FDIC alleged that the exchange and its senior executives made false representations stating or suggesting that certain crypto-related products were FDIC-insured.

Consequently, the FDIC ordered the San Francisco-based exchange to eliminate misleading statements on its website suggesting that its customers' accounts are insured by the FDIC.

OKCoin faces the risk of violating U.S. banking laws if it fails to address the FDIC’s demands promptly. Moreover, FDIC's call to action signifies a period of increased regulatory oversight over cryptocurrency operations, with the potential of enforcement action if these inaccuracies are not rectified swiftly.

The FDIC pointed out that OKCoin's lack of explicit distinction between U.S. dollar deposits and crypto assets on its platform has created a false impression. The regulator claims that OKCoin's statements imply that FDIC insurance, which is designed to safeguard traditional banking deposits, covers all types of customer funds, including cryptocurrencies.

The FDIC clarified that OKCoin does not fall under its insurance coverage, nor does it ensure non-deposit products. This is an oft-overlooked distinction, creating an impression that the FDIC's insurance covers crypto assets—a fact that it alleges OKCoin failed to clearly communicate.

In May 2022, the FDIC adopted a rule that outlines its authority to prohibit individuals and organizations from making misrepresentations about deposit insurance, or misusing its name or logo.

"This new decision from the American regulator is in line with the current prudential policy, particularly reinforced in this “post-FTX” era," Mathis Campestrin, head of the blockchain department at law firm Bruno Dubucq, told Decrypt.

In response to the FDIC's allegations, OKCoin has pledged to promptly assess the flagged statements and take necessary action to rectify them. “A core principle at OkCoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible,” a spokesperson told Decrypt. “OkCoin is aware of this matter and is taking immediate action to assess the statements flagged by the FDIC and address them as necessary."