FDIC doesn't back any crypto firms or cryptocurrency, says acting head

Quick Take

  • No crypto firm has federal deposit insurance, the acting head of the FDIC says. 
  • Sen. Bob Menendez, D-N.J., said the collapse FTX should be a “renewed call for Congress to take a serious look at crypto exchanges and lending platforms.”

The backstop of the U.S. banking system reiterated in a line of questioning before the Senate that its safeguards don't extend to crypto.

Sen. Bob Menendez, D-N.J., a senior member of the Senate Banking Committee, asked Acting Federal Deposit Insurance Corp. Chair Martin Gruenberg if FDIC insurance, which backs bank and credit union deposits in case of theft or institutional failure in the U.S., also extends to crypto firms or digital assets. 

“In fact at this time FDIC insurance does not cover cryptocurrency of any kind, is that correct?” asked Menendez. 

“That is correct,” Gruenberg, who was nominated as full chair by President Joe Biden on Monday, confirmed. 

 The collapse of FTX should be a "renewed call for Congress to take a serious look at crypto exchanges and lending platforms," Menendez continued.

The exchange took place at a Senate Banking Committee hearing on financial oversight and referenced earlier statements from firms like FTX.US and Voyager Digital that the FDIC had called out for misrepresenting their insurance. Both firms have subsequently filed for bankruptcy protection, with customers locked out of their funds.

“The strength of the FDIC is the public’s confidence in our deposit insurance system. So if that confidence is put in question, it really puts the system at risk," Gruenberg said.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.