OKCoin, the San Francisco-based cryptocurrency exchange, has been ordered by the U.S. Federal Deposit Insurance Corp. (FDIC) to remove misleading statements from its website that suggest its customers’ accounts are protected by the FDIC. Failure to comply could result in enforcement action for violating U.S. banking law, according to a letter sent to OKCoin CEO Hong Fang, media reports said.
The FDIC, a prominent banking regulator, has warned several cryptocurrency firms about making false claims, and OKCoin is the latest to receive a cease-and-desist demand. In its letter, the agency stated that OKCoin is not FDIC-insured and emphasized that the FDIC does not provide insurance for non-deposit products.
The primary concern lies in OKCoin’s failure to distinguish between U.S. dollar deposits and cryptocurrency assets, misleadingly implying that FDIC insurance coverage extends to all customer funds, including crypto assets.
The FDIC highlighted three instances of “false and misleading representations” made by OKCoin. Firstly, the agency pointed to a statement on OKCoin’s website claiming that the Provenance Blockchain’s HASH token had received regulatory acceptance from the U.S. Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve (FED), and the FDIC.
Secondly, the FDIC referenced a 2020 post on OKCoin’s website, where the company advertised itself as “Licensed across the US with FDIC insurance on OKCoin accounts.” Lastly, the regulator cited a Twitter post by a company official stating that FDIC insurance on USD deposits was offered to customers in the United States.
OKCoin is not the first cryptocurrency firm to receive such an order from the FDIC. Both now-bankrupt Voyager Digital and FTX.US faced similar warnings after their respective CEOs made misleading claims about FDIC coverage. The FDIC had previously issued a broader caution to the crypto sector, emphasizing that FDIC protections are exclusively applicable to banks and not extended to cryptocurrency firms that hold FDIC-insured bank accounts.
In response to the FDIC’s order, OKCoin expressed its commitment to respecting applicable laws and regulations while reaffirming its willingness to collaborate with regulators. A spokesperson for the company stated that OKCoin was aware of the matter and taking immediate action to assess the statements flagged by the FDIC, with a plan to address them accordingly.
The FDIC’s scrutiny of cryptocurrency firms and its efforts to prevent misleading claims reflect the ongoing challenges faced by regulatory bodies in adapting to the evolving landscape of digital assets. As the crypto industry continues to grow, regulators are intensifying their focus on ensuring consumer protection and maintaining transparency within the market.
