OKCoin Must Immediately Remove FDIC Insurance, The Regulator Warns

Key Points:

• The FDIC has ordered OKCoin to remove deceptive representations implying that its clients’ accounts are insured by the FDIC.
• The company claimed to be insured by the FDIC.
• The FDIC has asked that the exchange quickly delete any infringing claims from its site or face potential enforcement action for breaching US banking law.

The U.S. Federal Deposit Insurance Corporation (FDIC) sent a letter to OKCoin, a cryptocurrency exchange, demanding that the website immediately remove any statement that FDIC guarantees OKCoin’s accounts or funds.

The FDIC has asked that OKCoin USA Inc., OKX‘s sister exchange in San Francisco, remove any infringing claims off its site immediately or face probable enforcement action for breaching US banking law, according to the letter sent to CEO Hong Fang. The warning is the latest in a series issued by the banking watchdog to cryptocurrency companies.

The SEC noted three instances of false and misleading claims, including a reference on the company’s website that the Provenance Blockchain’s HASH token on OKCoin has achieved wide regulatory approval from the SEC, OCC, FED, and FDIC, as well as a 2020 posting on the company’s website.

OKCoin noted in a statement that the exchange represented on its webpage that by subscribing to FDIC insurance, it was able to get licenses across the United States. Users in the United States may have their USD deposits insured by the FDIC.

“We’re one of the few exchanges in the United States focused on winning licenses for every state. OKCoin is now licensed in 42 states for token-to-token trading and USD-to-token trading, and 5 states for token-to-token trading. We’re working hard to open up in all 50 states. OKCoin provides FDIC insurance for all USD deposits,” according to the exchange statement.

An Okcoin spokesperson: “A core principle at Okcoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible. Okcoin is aware of this matter and is taking immediate action to assess the statements flagged by the FDIC and address them as necessary.”

The FDIC has previously issued a wider caution to the crypto industry, stating that its safeguards only apply to banks, not crypto companies with FDIC-insured bank accounts.

Similar orders were previously issued to now-bankrupt Voyager Digital and FTX.US after then-CEO Brett Harrison indicated that the business was protected by the regulator.

Last month, the FDIC’s Martin Gruenberg said during a hearing on “Oversight of Prudential Regulators” that weak management was the fundamental cause of Signature Bank’s downfall. According to the FDIC’s chief risk officer, due to an overreliance on uninsured deposits and control to finance its rapid growth, bank management failed to prioritize good governance initiatives, was slow to respond to regulatory advice, and failed to implement basic liquidity risk management practices.

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Harold

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