After allegedly violating Section 18(a)(4) of the Federal Deposit Insurance Act, OKCoin was ordered by the FDIC to take corrective action or cease and desist.
OKCoin Ordered to Remove Misleading Advertising Content
OKCoin allegedly made claims that a specific blockchain was approved by the FDIC and that US customers could benefit from federal insurance without specifying whether these referred to crypto or fiat.
Additionally, the company apparently failed to disclose which Insured Depository Institutions held customer funds. The banking regulator alleged that under Part 328, no person may represent or imply that any uninsured financial product is insured or guaranteed by the FDIC as part of an advertisement, solicitation, or other publication or dissemination.
As a result, the watchdog ordered the exchange to take down claims that the FDIC insures OKCoin and non-deposit products beyond its obligations in the FDI Act. OKCoin must also remove material from websites and applications claiming the FDIC’s approval of specific blockchains.
Furthermore, the firm must desist from making any future false statements about FDIC insurance and submit written confirmation of its compliance within 15 days.
It is worth noting that the FDIC, Federal Reserve, and Office of the Comptroller of the Currency jointly regulate the US banking sector.
Earlier this year, crypto venture capitalist Nic Carter argued that US regulators conspired to stifle the US crypto industry.
Increasing Regulatory Pressure on US Cryptocurrency Companies
Earlier this year, Gemini customers were upset after discovering that their Earn funds were not insured by the FDIC, despite the exchange’s terms and conditions suggesting otherwise. The FDIC had to bail out Signature Bank and Silicon Valley Bank in the same period, after both underwent a bank run. It is worth noting that SVB held reserves backing Circle’s USDC stablecoin.
Coinbase faced regulatory trouble this year, as it failed to register as a broker-dealer, depriving customers of legal investor protections. Interestingly, despite the US government using Coinbase to store crypto, the exchange still faced a lawsuit.
Kraken, an international exchange, had to pull its staking product from the US after the US Securities and Exchange Commission charged it with offering unregistered securities. Similarly, Binance has also faced charges from US regulators. Despite all this, the SEC has mostly ignored pleas for clearer crypto regulation.