FDIC Requires Buyers of Failed Banks to Give Up Crypto Services

Various Cryptocurrency Coins & Tokens FDIC
Various Cryptocurrency Coins & Tokens

The Federal Deposit Insurance Corporation (FDIC), a United States government agency responsible for protecting bank depositors, has requested that any potential buyers of failed U.S. banks, including Signature Bank, relinquish all cryptocurrency-related business.

The FDIC Remains Anti-Crypto

As reported by Reuters, the FDIC regulators have asked interested banks to submit their bids by March 17. They will only accept offers from institutions with existing bank charters, prioritizing traditional lenders over private equity firms. The agency aims to sell entire businesses, but partial sales may be considered if the whole company sales do not happen.

Signature Bank, a central crypto-enabled bank based in New York, is known for its partnerships in the crypto industry, such as Coinbase, Paxos, BitGo, Celsius, and others. It holds at least $3.3 billion in assets of Circle, which issues the second-largest stablecoin by market capitalization, USD Coin (USDC). However, any buyer of Signature must agree to give up all crypto-related services at the bank.

This move by the FDIC comes amid concerns that the federal government is “weaponizing” issues around the banking industry to go after crypto, as expressed by U.S. Representative Tom Emmer in a letter to FDIC Chairman Martin Gruenberg. 

Emmer believes that these actions could lead to broader financial instability, as the government is using recent instability in the banking sector as a pretext to attack the crypto industry.

Signature Bank Collapse Fallout

The New York State Department of Financial Services officially closed down and took over Signature Bank on March 12, appointing the FDIC as the receiver. 

To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank N.A., a full-service bank that the FDIC will operate as it markets the institution to potential bidders.

While some have speculated that the FDIC’s move is a “powerful anti-crypto message,” the agency previously stated that it does not discourage or prohibit banking organizations from providing services to customers of any specific class or type, as permitted by law or regulation.

Uncovering A Bigger Problem?

However, reports suggest that Signature’s CEO and CFO allegedly committed fraud by falsely claiming to be financially strong just three days before the bank was shut down. Additionally, the bank has been investigated for alleged money laundering.

In conclusion, the FDIC’s decision to require buyers of failed banks to relinquish crypto-related services could have significant implications for the crypto industry in the United States. 

However, it remains to be seen how this move will affect other banks with crypto-related services and whether it will lead to broader regulatory action against the industry.

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