June 14, 2024

The US Credit Guarantee Fund says it won’t cover cryptocurrency losses

2 min read
The US Credit Guarantee Fund says it won’t cover cryptocurrency losses

In an update on its page last Friday (10), the U.S. Federal Credit Insurance Corporation (FDIC) said it could not cover the loopholes in the cryptocurrency market. The announcement comes at a time when banks linked to cryptocurrency firms are collapsing.

It is worth remembering that the Federal Deposit Insurance Corporation (FDIC) is an agency affiliated with the US government.

For individual or corporate bank deposits, the US FDIC protects up to $250,000 per depositor. By clarifying that it does not undertake security linked to cryptocurrencies, the public body makes it clear that it cannot prevent the bankruptcy of companies in the sector.

Types of Products Not Protected by the US FDIC Other Than Cryptocurrencies

Through its page, The FDIC The guarantee states that it does not cover any financial products, not just cryptocurrencies.

Stocks and bonds also lack investor protection, according to the agency’s website. Treasuries are hedged, meaning that a typical breakdown in the country’s traditional financial market does not hedge many products, only bank deposits.

Types of financial products not covered by the FDIC in the United States, regulations last updated on March 10, 2023. Credit: FDIC.

In February 2023, a brokerage operating in the cryptocurrency market received a warning for telling its clients that it had FDIC protection. Realizing the false promises, US Public Service asked the platform to stop lying to its customers.

Recent crashes in the cryptocurrency market have already come under scrutiny in various US departments, which are studying stricter regulations for the sector.

Stablecoins and Banks in the Eye of the Hurricane

Insecurity for the cryptocurrency market is not really new, but the strengthening of the FDIC’s information, the system to protect the depositors of financial institutions in the event of insolvency or bankruptcy, proves that it does not work at all. Corruptions.

One of the biggest stablecoins in the market, USDC has investors worried. It should be noted that the stablecoin ballast is partially deposited with an American bank, Silicon Valley Bank.

It is still unclear to investors how Circle’s stablecoin will perform in the coming days, but a bank failure affects one of the largest stablecoins in use globally, including in Brazil.

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