Home General Investments Crypto investments aren’t protected like bank accounts: FDIC

Crypto investments aren’t protected like bank accounts: FDIC

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Cryptocurrency is confusing and the prices of bitcoins and other cryptos are extremely volatile. Moreover, the federal government now considers it necessary to reiterate that the money invested in cryptocurrency is not protected in the same way as cash in banks.

The Federal Deposit Insurance Corporation (FDIC) issued a warning to banks on Friday to ensure that the crypto companies they partner with accurately represent the risks associated with digital assets. The FDIC, which is the regulator that insures cash held in banks on behalf of consumers, is particularly concerned about the confusion that could result when customers invest money in institutions that offer both cash deposits and crypto products.

“Inaccurate representations about deposit insurance by non-banks, including crypto companies, can confuse non-bank customers and lead those customers to mistakenly believe that they are protected against any type of loss,” the FDIC said. advisory bed.

Is crypto protected by FDIC insurance?

The FDIC will guarantee up to $250,000 in cash deposits at thousands of banks across the country. This means that if the bank fails, customers are sure to get their money back. This protection only applies to certain deposits such as check accounts, savings accounts and certificates of deposit (CD) — not investment products like actions or cryptocurrency.

“When you invest in stocks or in crypto, you risk losing it all,” Richard Smith, president and CEO of the Foundation for the Study of Cycles, a nonprofit that studies recurring patterns in the world. economics, science and the arts, already said Money. “There is no one to ensure that your losses never exceed a certain level.”

Crypto assets are risky

The FDIC’s broad warning follows a letter The FDIC and Federal Reserve sent crypto broker Voyager Digital on Thursday, warning the firm to stop claiming that its clients’ crypto deposits are protected by FDIC insurance — they are not.

Voyager is one of many crypto companies that has been forced to suspend withdrawals and trades (blocking customers from accessing their money) amid a massive slowdown in the cryptocurrency market.

Other crypto companies have also temporarily suspended operations, and some cryptos have crashed completely, wiping out billions of dollars in investments. This and the looming threat of a recession have helped lead to a loss of trustworthy in the crypto market in general.

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