FDIC TELLS FTX AND OTHER CRYPTO EXCHANGES TO CUT THE FALSE CLAIMS
FTX and several other crypto exchanges have been playing loose with facts regarding whether client held assets are FDIC insured.
The FDIC responded this past week with a cease-and-desist letter to the exchanges involved, demanding that they take down the deceptive messaging, which included some tweets by FTX US President Brett Harrison.
At issue is whether deposits made into the crypto exchanges are FDIC insured. They aren’t, in any direct way at least, because the crypto exchanges themselves are not FDIC insured.
Despite that, because FTX apparently holds some fiat deposits (including employer checks deposited directly into FTX client brokerage accounts) in bank accounts that are FDIC insured, some company executives were making expansive claims regarding being FDIC insured.
Harrison said in a 27 July tweet, for example:
“brokerage accounts are SIPC-insured, cash associated with brokerage accounts is managed into FDIC-insured accounts at our partner bank
Harrison responded to the controversy on 19 August, saying:
“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.”
Some crypto news outlets including Cryptonews.com, Cryptosec.info, SmartAsset.com, and the site FDICCrypto.com also received cease and desist letters.
Deception Adds to Crypto Uncertainty
Given recent liquidity problems and failures of crypto exchanges, stablecoins predicated on flawed algorithms instead of assets, and other woes, the confusing statements and assertions of FTX and others are certainly not welcome news for the sector.
Consumers have a right to clarity with regard to the money they are investing and risking via crypto exchanges and other services. It was consumers demanding clarity that led to Harrison making deceptive claims regarding assets held on the FTX exchange.
TRENDPOST: The FDIC was right to take action. Now if only there were some agency that would stop things like the Feds draining the spending power of citizen savings via the “backdoor tax” of printing excess money to fund its far-flung pursuits, without ever having to plainly explain the theft to the People.
Or Congress naming a trillion dollar spending bill that will do nothing to solve inflation “The Inflation Reduction Act.”
While they’re at it, we’d like to see companies stop doing things like launching a huge advertising campaign touting the deliciousness of “Just Eggs” that aren’t made with eggs at all.
Or marketing strangely bloody plant protein as “Impossible Meat”, which isn’t meat—and can confuse consumers—well, at least until that first bite.
BLACKSTONE MAKES HIGH PROFILE CRYPTO HIRE
Blackstone has hired Adam White, the former CEO and president of bitcoin custody firm Bakkt, as a senior adviser.
According to crypto news outlet theblock.co, White will aid in the understanding and critical thinking of the crypto world by the management of the firm and its portfolio firms.
This hire comes shortly after BlackRock, which originally was under Blackstone, gained exposure for its clients to crypto investing via an announced partnership with the Coinbase exchange.
The news represents a positive in the midst of continued strong headwinds in the crypto sector. Blackstone represents yet another high profile traditional investment firm showing interest in gaining crypto exposure for their clients.
With a whopping 880 billion dollars in assets under management, even a small portion flowing to cryptos would be significant.
STABLECOINS BACKING U.S. DEBT
The relationship between the U.S. debt market and stablecoins is becoming more important.
A new Cointelegraph.com report noted that stablecoin issuers like Tether (USDT) and Circle, the company that issues USDC, now hold more short term Treasury Bills than some of the massive investment companies.
As of May 2022, different stablecoin providers held $80 billion in short-term U.S. government debt collectively, according to Cointelegraph, citing a report by the investment bank JPMorgan published in mid August.
To illustrate how comparatively large those holdings are, Tether, Circle, and other stablecoin companies currently hold more T-bills than Warren Buffett’s Berkshire Hathaway investment firm.
Stablecoins compose two percent of the market for U.S. Treasuries. That’s more than prime market money market funds (MMFs) and offshore MMFs, the JPMorgan report showed.
The JPMorgan report also predicted that newer stablecoin issuers would have a lot of room to grow if stablecoins became a more common form of payment, according to payments industry website pymnts.com.