{"id":502366,"date":"2022-10-20T17:03:00","date_gmt":"2022-10-20T14:03:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/"},"modified":"2022-10-20T17:03:00","modified_gmt":"2022-10-20T14:03:00","slug":"crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/","title":{"rendered":"# Crypto adoption: How FDIC insurance could bring Bitcoin to the masses"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a368e160d48b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a368e160d48b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/#%E2%80%9D_Crypto_adoption_How_FDIC_insurance_could_bring_Bitcoin_to_the_masses_%E2%80%9C\" >&#8221; Crypto adoption: How FDIC insurance could bring Bitcoin to the masses &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/#What_is_FDIC_insurance\" >What is FDIC insurance?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/#The_potential_impact_on_crypto\" >The potential impact on crypto<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/#How_hard_is_it_to_get_FDIC_insured\" >How hard is it to get FDIC insured?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\/#Is_the_insurance_worth_chasing\" >Is the insurance worth chasing?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Crypto_adoption_How_FDIC_insurance_could_bring_Bitcoin_to_the_masses_%E2%80%9C\"><\/span>&#8221; Crypto adoption: How FDIC insurance could bring Bitcoin to the masses &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTAvNTYyNmE2MjEtMjhmNi00ZjM1LWEwYmItMDEyZGRmNTY2M2VlLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-4b69a2fe>Over the years, several cryptocurrency companies have claimed that deposits with them were insured by the United States Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) as if they were regular savings accounts. While so far, no crypto firm has been able to offer depositors this type of insurance, some speculate it could be the key to mass adoption.<\/p>\n<p>The most notable case is that of bankrupt lender Voyager Digital, which saw regulators instruct it to remove \u201cfalse and misleading statements\u201d regarding FDIC insurance. Crypto exchange FTX has been a beacon of hope looking to backstop contagion in the cryptocurrency industry, but it received a cease-and-desist letter from the FDIC to stop suggesting user funds on the platform were insured.<\/p>\n<p>As it stands, even major players in the cryptocurrency space aren\u2019t FDIC-insured. Coinbase, for example, details on its pages that it <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/help.coinbase.com\/en\/coinbase\/other-topics\/legal-policies\/how-is-coinbase-insured\">carries<\/a> insurance against losses from theft but is not an FDIC-insured bank and that cryptocurrency is \u201cnot insured or guaranteed by or subject to the protections\u201d of the FDIC or Securities Investor Protection Corporation (SIPC).<\/p>\n<p>The exchange, however, points out that \u201cto the extent U.S. customer funds are held as cash, they are maintained in pooled custodial accounts at one or more banks insured by the FDIC.\u201d Speaking to Cointelegraph on the subject, a Coinbase spokesperson only said she can confirm \u201cthat Coinbase is aligned with the latest FDIC guidance.\u201d<\/p>\n<p>So what is FDIC insurance, why is it so sought-after in the cryptocurrency industry and why does it remain so elusive?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_FDIC_insurance\"><\/span>What is FDIC insurance?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The FDIC itself was<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/e\/emergencybankingact.asp\"> created<\/a> amid the Great Depression in 1933 to boost the financial system\u2019s stability following a wave of bank failures during the 1920s and has managed to protect depositors ever since.<\/p>\n<p>FDIC insurance refers to the insurance provided by this agency that safeguards customer deposits in the event of bank failures. Cal Evans, managing associate at blockchain legal services firm Gresham International, told Cointelegraph:<\/p>\n<blockquote><p>\u201cFDIC insurance is basically a layer of protection that covers one individual for up to $250,000 and its a backing that\u2019s given by the United States government. It says \u2018look, if this company goes bankrupt, we will guarantee your account to the value of $250,000 per person, per company.\u2019\u201d<\/p><\/blockquote>\n<p>So, if an FDIC-insured financial institution fails to meet its obligations to customers, the FDIC pays these amounts to depositors up to the assured amount while assuming the bank and selling its assets to pay off owed debt. It is worth noting that FDIC insurance does not cover investments like mutual funds.<\/p>\n<p>Other countries have similar schemes, with deposits in the European Union being guaranteed up to $98,000 (100,000 euros) to protect against bank failures, for example. These schemes improve confidence in the financial system.<\/p>\n<p>Speaking to Cointelegraph, Noah Buxton, a partner and practice leader for blockchain and digital assets at consulting firm Armanino, said, \u201cNo customer\u2019s crypto holdings are FDIC-insured today,\u201d but added that crypto platforms often hold customers\u2019 dollar balances in financial institutions that are FDIC-insured.<\/p>\n<p>There is a distinct difference between users having their funds insured, and the impact of a cryptocurrency firm having FDIC insurance \u2014 even for only United States dollar deposits \u2014 is hard to estimate.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_potential_impact_on_crypto\"><\/span>The potential impact on crypto<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If the FDIC were to insure deposits at a cryptocurrency platform, it would likely gain an advantage over other U.S.-based cryptocurrency platforms, as the perceived security of that platform would gain a huge boost, especially as it would be seen as a green flag from regulators as well.<\/p>\n<p><em><strong>Recent:\u00a0Tech\u2019s good intentions and why Satoshi\u2019s new \u2018<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social<\/a> order\u2019 foundered<\/strong><\/em><\/p>\n<p>Evans said that the FDIC would give the retail market \u201ca lot more confidence because if FDIC insurance does h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en and does apply to these companies, that means it\u2019s going to massively, massively encourage people who are in the United States to put their money in crypto because it\u2019s as secure as putting dollars at a bank,\u201d adding:<\/p>\n<blockquote><p>\u201cIt\u2019s going to massively help adoption, because it\u2019s going to encourage the retail market to see companies like this at a parallel, in term of safety, with banks that people know.\u201d<\/p><\/blockquote>\n<p>Mila Wild, marketing manager at cryptocurrency exchange ChangeHero, told Cointelegraph that one of the biggest problems the cryptocurrency sector faces is a lack of regulation and supervision, especially after the collapse of the Terra ecosystem \u201cundermined the confidence of many investors.\u201d<\/p>\n<p>Per Wild, the FDIC doesn\u2019t just insure customer deposits, as it also \u201cconducts constant monitoring of financial institutions for security and compliance with consumer protection requirements.\u201d<\/p>\n<p>Dion Guillaume, global head of PR and communication at crypto exchange Gate.io, told Cointelegraph that a \u201cfriendly crypto regulatory environment would be critical for adoption,\u201d as \u201cblind regulatory sanctions\u201d do not help. Guillaume added that insuring digital assets can be very different and several factors need to be carefully considered.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_hard_is_it_to_get_FDIC_insured\"><\/span>How hard is it to get FDIC insured?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As the FDIC could significantly boost confidence in the industry and several large exchanges have shown interest in getting it, it\u2019s important to look at how hard it is for a cryptocurrency-native firm to actually become FDIC-insured.<\/p>\n<p>Evans told Cointelegraph that it\u2019s \u201cactually relatively straightforward to get\u201d as long as specific criteria are met by the organization looking to get it. The organization needs to make necessary applications and prove requisite liquidity and could potentially have to detail its management structure.<\/p>\n<p>To Evans, FDIC insurance would \u201cmassively give companies operating in the United States a huge, huge benefit over foreign firms,\u201d as U.S. residents who open accounts with insured firms would have a major incentive not to use decentralized exchanges or other peer-to-peer platforms.<\/p>\n<p>Wild had a more negative stance, saying it\u2019s \u201cnot possible to get FDIC insurance,\u201d as it only covers \u201cdeposits held in insured banks and savings associations and protects against losses caused by the bankruptcy of these insured deposit institutions.\u201d Wild added:<\/p>\n<blockquote><p>\u201cEven if we imagine that crypto projects will be able to have FDIC insurance someday, it means sacrificing decentralization as one of the core crypto values.\u201d<\/p><\/blockquote>\n<p>She further <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.fdic.gov\/news\/financial-institution-letters\/2022\/fil22035.html\">claimed<\/a> that the FDIC\u2019s statements on dealings with crypto firms are \u201ctrying to infringe on crypto companies and emphasize their perceived negative impact on society.\u201d Wild concluded that the FDIC telling crypto projects not to suggest they\u2019re insured \u201ccould further lower\u201d trust in cryptocurrencies.<\/p>\n<p>To Wild, cryptocurrencies will remain a riskier asset for the time being, as users won\u2019t have any type of government protection. As a result, crypto users should \u201cstay vigilant about their assets.\u201d This does not mean fiat savings are safer, she said, as increasing inflation is eating those away.<\/p>\n<p>Noah Buxton, a partner at consulting firm Armanino, went into more detail on the process, telling Cointelegraph that platforms attaining FDIC insurance would \u201crequire a modified underwriting regime, the creation of which has many significant hurdles.\u201d <\/p>\n<p>He said the FDIC would need to figure out how to take possession of crypto assets, how to value them and how to distribute them to the customers of failed crypto platforms, adding:<\/p>\n<blockquote><p>\u201cWhile this is possible and may happen, we are more likely to see private insurance and reinsurance vehicles fill the void for the foreseeable future. This is a necessary component of any market and the broader coverage availability and competitive set of insurance options will benefit crypto holders.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Is_the_insurance_worth_chasing\"><\/span>Is the insurance worth chasing?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If users are, in the future, able to get insurance through other sources \u2014 such as private company solutions or decentralized protocols \u2014 it\u2019s worth questioning whether FDIC insurance is worth it in the long run. Insurance from the FDIC could be a significant centralizing factor, as most would likely move to a platform that has its backing.<\/p>\n<p>Evans said he believes FDIC insurance \u201cis not necessarily wanted or needed,\u201d as wherever there\u2019s more protection, \u201cthere happens to be more oversight and regulation,\u201d which would mean insured companies would be \u201cvery secure and very regulated.\u201d<\/p>\n<p>These regulations could further restrict those who are able to create accounts with these companies, which would add to the question of centralization that the crypto insurance industry already faces.<\/p>\n<p>Bitcoin Foundation chairman Brock Pierce told Cointelegraph that the crypto industry will nevertheless \u201csee more companies try to get it\u201d after the recent wave of crypto lenders going under, which will make it \u201ceven harder for them now.\u201d<\/p>\n<p>Pierce did not expect FDIC insurance to \u201cbe a big deal or matter much with regards to overall crypto adoption.\u201d Whether it impacts cryptocurrency adoption at all may only be clear once\/if the FDIC does insure cryptocurrency deposits.<\/p>\n<p><strong><em>Recent:\u00a0\u2018The social benefits are huge\u2019: Web3 gaming to shift digital ownership<\/em><\/strong><\/p>\n<p>It\u2019s worth noting that FDIC insurance may bring in a false sense of security. While no bank depositor has lost their funds since the FDIC was launched, its reserve fund isn\u2019t fully funded. The FDIC,<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/f\/fdic-insured-account.asp\"> according<\/a> to Investopedia, is \u201cnormally short of its total insurance exposure by more than 99%.\u201d<\/p>\n<p>The FDIC has, at times, borrowed money from the U.S. Treasury in the form of short-term loans. Self-custody may, for the experienced cryptocurrency investor, continue being a viable option, even if a crypto firm is one day FDIC insured.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"crypto_biz\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/crypto-adoption-how-fdic-insurance-could-bring-bitcoin-to-the-masses\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Crypto adoption: How FDIC insurance could bring Bitcoin to the masses &#8220; Over the years, several cryptocurrency companies have claimed that deposits with them were insured by the United States Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) as if they were regular savings accounts. While so far, no crypto firm has been&#8230;<\/p>\n","protected":false},"author":1,"featured_media":502367,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTAvNTYyNmE2MjEtMjhmNi00ZjM1LWEwYmItMDEyZGRmNTY2M2VlLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75022,74983,96190,74892,74355,71939,70299,55229,70934,67874],"class_list":["post-502366","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-central-bank","tag-decentralization","tag-insurance-industry","tag-tokens","tag-adoption","tag-banks","tag-insurance","tag-law","tag-regulation","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/502366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=502366"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/502366\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/502367"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=502366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=502366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=502366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}