OKCoin warned by the FDIC over promotional material

Based in California, OKX-affiliated crypto exchange OKCoin USA Inc. has received a letter from the FDIC, urging it to stop using the agency’s name in order to bolster its legitimacy.

Potential FDIA Violation

LetterAddressing Hong Phang, CEO of OKCoin, warned the exchange that it was in potential violation of Section 18(a)(4) of the Federal Deposit Insurance Act (FDIA).

This section of the FDIA prohibits companies and individuals from claiming that an uninsured or potentially uninsured deposit is actually covered by the FDIC, whether in promotional materials or documents. In the case of OKCoin, the FDIC has now clearly stated that insurance is not provided.

“OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products. By not differentiating between US-dollar deposits and crypto assets, the statement applies FDIC insurance coverage to all customer funds (including crypto assets). In addition, the FDIC does not insure or endorse particular blockchains. Accordingly, these statements have the potential to mislead and potentially harm consumers.

According to the FDIC, OKCoin has done this on three separate occasions, including a Twitter post—which appears to have been deleted—in which the firm’s chief marketing officer claimed that the agency’s deposits were being used by people in the US. Insurance has been done. Below is the tweet linked to a letter from the FDIC. A search of the Internet Archive for the original tweet returned no results.

Join OKCoin COO @JasonKLau And to special guest CMO @HaiderSF and @Blockstack #ama 10:00am PST Wed. December 16

What does it mean #okcoin Became the first US exchange to list $stx,
tag your questions #OKCoinAMA

Sign up now: pic.twitter.com/9yNHwCYklN

— Okcoin (@Okcoin) December 15, 2020

However, the claim is still listed on a promotion for FDIC insurance. blog post Written by OKCoin.

FDIC actions consistent with previous statements

This is not the first time the FDIC ordered crypto-related companies to stop using the institution to provide legitimacy to their platforms. last year there were five exchanges serviced FTX and Voyager Digital are among them, with similar letters.

There were also general guidelines for crypto companies to follow when referring to the FDIC. published by the regulator.

As per the current guidelines, the only time a failed crypto platform will have to bail out its customers is if the bank already has an insured account. Furthermore, it is clearly stated that NeoBanks are not covered by FDIC insurance.

“FDIC insurance does not protect non-bank customers from the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, or other entities that mimic banks, but Not called “neobanks”.

OKCoin now has 15 business days to remove all mention of FDIC insurance on its platform and on the accounts of its employees. Failure to do so will result in legal action by the FDIC against the exchange.