The US Consumer Financial Protection Bureau on Thursday issued a warning to people using person-to-person services to store funds, reminding them that they are not federally insured in the wake of FTX and several bank collapses. .
The CFPB said in a statement that transaction volumes on payment apps have “increased significantly”. reports,
The CFPB said the collapse of crypto exchange FTX and crypto lender Voyager Digital resulted in hundreds of millions of dollars in losses for consumers.
“After the demise of Silicon Valley Bank, Signature Bank, Silvergate Bank and First Republic Bank this year, the public has learned more about the importance of federal deposit insurance coverage,” the CFPB said.
“These incidents have drawn renewed attention to the different types of financial institutions that consumers use and the extent to which consumers’ money at those financial institutions can be protected from harm,” the agency said.
The CFPB said it found that “funds stored, and often not held in an account at a bank or credit union, may be at risk of loss in the event of a financial crisis or failure of an entity operating a non-bank payment platform.” And there is a lack of personal deposit insurance coverage.”
More payment apps offer crypto services
Companies like Venmo and PayPal offer crypto services, but the CFPB warns that some funds are not eligible for deposit insurance.
The US Federal Deposit Insurance Corporation protects depositors up to at least $250,000 per depositor in case the bank fails.
Three crypto friendly banks – Silicon Valley Bank, Silvergate Bank and Signature Bank – crashed in March, causing a stock price crash and a deposit run.
FDIC Chairman Martin Gruenberg spoke In a congressional hearing this month on Signature Bank’s failure, blaming the bank for its over-reliance on uninsured crypto deposits without implementing proper risk control measures, citing poor management as the root cause of its failure.