FDIC acting chair says no crypto firms or tokens are backed by agency

Federal Deposit Insurance Corporation acting chair Martin Gruenberg said the agency does not back any crypto firms in the United States, nor does its insurance cover losses from tokens.

In a Nov. 15 hearing of the Senate Banking Committee on the oversight of financial regulators, New Jersey Senator Bob Menendez said lawmakers needed to “take a serious look at crypto exchanges and lending platforms” over risky behavior. Gruenberg responded to Menendez’s questions confirming there were “no cryptocurrency firms backed by the FDIC” and “FDIC insurance does not cover cryptocurrency of any kind.”

FDIC insurance normally protects deposits at financial institutions in the United States in the event of bank failure or under other special circumstances. Menendez cited the FDIC issuing cease-and-desist letters in August to companies for allegedly making false representations about deposit insurance related to cryptocurrencies and questioned how the agency, under Gruenberg, would address risks from crypto companies.

“This has been a key priority for us,” said Gruenberg. “When we identify some companies in the crypto space and others engaging in misrepresentation, we acted very forcefully, sending letters demanding that they cease and desist and indicating that if they did not comply, we have enforcement authorities available to us under the law that we can bring to bear.”

Related: Crypto adoption: How FDIC insurance could bring Bitcoin to the masses

Gruenberg has been serving as FDIC acting chair since February following the resignation of former chair Jelena McWilliams. On Nov. 14, U.S. President Joe Biden announced he would be nominating Gruenberg for a five-year term as the next FDIC chair. The acting chair will also testify before the House Financial Services Committee on Nov. 16.