The FDIC alleges that the financial products of Unbanked, a cryptocurrency debit card platform, were not insured by the agency. In doing so, Unbanked’s management falsely claims on its website, promotional materials, and social media accounts that its cryptocurrency-related products and services are FDIC-insured. By doing so, the company makes it sound as if FDIC insurance will protect cryptocurrency investors from losses.
The agency clarified that FDIC insurance does not cover digital assets. In addition, the FDIC insures only deposits held at financial institutions insured by the agency and protects only against losses resulting from the bankruptcy of an FDIC-insured financial institution.
In June, the Unbanked platform announced it was winding down its operations and urged users to withdraw their crypto assets within 30 days. The decision to cease operations was made because the company was unable to raise $5 million in funding. The platform’s management said it will continue to explore alternative sources of funding, and if that amount is raised, Unbanked will resume operations.
The FDIC noted that the company’s announcement that it is winding down operations does not mean it has ceased operations entirely. Therefore, the regulator demanded that Unbanked immediately remove all statements that funds on the platform are protected by FDIC insurance and stop making such statements in the future. Unbanked is required to provide written confirmation within 15 days that the regulator’s requirement has been met.
Last year, the FDIC urged banks to more carefully assess risks when dealing with crypto assets, despite growing investor interest in them.