Federal Deposit Insurance Corporation (FDIC), the United States banking regulator has issued a new recommendation to banks to reduce client misunderstanding over cryptocurrencies.
In advice released on July 29, the FDIC expressed worry that clients may be unclear about the safety of their cryptocurrency investments.
According to the FDIC, the guidance targets firms that provide uninsured cryptocurrency products and insured bank deposit products. The agency emphasised that banks must ensure consumers know which of their money is protected, particularly in the case of a collapse.
FDIC said, “Inaccurate claims concerning deposit insurance by non-banks, including crypto firms, may mislead the non-consumers bank’s and lead them to assume they are covered against any form of loss.”
Banks will monitor cryptocurrency firms
A portion of the new guideline mandates that banks authenticate and supervise crypto firms, so they do not misrepresent the existence of deposit protection. In such a situation, the FDIC demanded that banks take the appropriate steps to rectify misrepresentations.
In addition, the agency warned that banks should have adequate risk management procedures in place to ensure that any services supplied by third-party crypto firms are legal.
The guidance also emphasised the need for clear communication, urging crypto firms who market or provide FDIC-insured goods to prevent uncertainty via direct communications.
Such businesses were tasked with ensuring that their consumers know they are not insured banks and communicating the dangers associated with cryptocurrencies, such as their volatile pricing.
Regrettably, the FDIC has previously cautioned banks within its purview against using cryptocurrencies such as Bitcoin (BTC) because they constitute a threat to financial stability.