Potential Buyers of Signature Bank Won’t Have to Abandon Crypto: FDIC
- A Reuters report claimed that the FDIC has asked potential buyers of Signature Bank to give up the bank’s crypto clients following acquisition.
- A spokesperson from the FDIC said that the regulator has not stated any such limitation, implied or otherwise.
- The regulators had asked potential buyers of Silicon Valley Bank (SVB) and Signature Bank to submit their bids by Friday.
- The FDIC spokesperson confirmed that the potential buyers are in the position to decide which former clients of Signature Bank they want to keep.
The collapse of Silicon Valley Bank (SVB) caused a widespread panic in the crypto industry, but the price of crypto assets continued to rise. SVB was one of the two major banks in the US that provided their services to crypto firms, with the second one being Signature Bank. Shortly after the closure of SVB by the California Department of Financial Protection and Innovation (DFPI), Signature was also shut down by New York regulators.
The New York Department of Financial Services (NYDFS) cited liquidity issues and closed Signature Bank, establishing the Federal Deposit Insurance Corporation (FDIC) as its receiver. The executives of the bank were notified just hours before the official announcement of the closure of the bank. The bank was heavily invested in crypto, and a quarter of all its deposits came from the blockchain space.
The closure of Signature Bank affected many crypto firms, including Circle, the company behind the popular stablecoin USDC. The stablecoin was de-pegged after Circle confirmed that it had around $3.3 billion, i.e., 8% of its cash reserves are stuck in the bank. The bank and its assets were put up for sale by the US authorities and a stipulation was established that only potential buyers with an existing bank charter were allowed to take a peek at the bank’s financials.
As a result of this stipulation, the Royal Bank of Canada and PNC Financial Services decided that they would not participate in the sale of Signature Bank’s assets. It is crucial to note that a report from Reuters stated that the FDIC informed potential buyers that they would be required to abandon the cryptocurrency industry completely,
Additionally, the regulators had asked potential buyers of SVB and Signature Bank to submit their bids by Friday and the FDIC has denied asking them to give up the bank’s crypto businesses following the acquisition of assets. Following this statement from an FDIC spokesperson, Reuters have updated their report to include the statement.
Instead of asking buyers to refrain from crypto businesses, the FDIC spokesperson allegedly referred potential buyers to an earlier statement, stating that dealing with crypto can poses additional risks.
‘In light of events that highlight a number of risks associated with crypto–assets and crypto-asset sector participants, the agencies issued a statement in January 2023 addressing key risks and are now issuing a statement related to liquidity risks. In light of these heightened risks, it is important for banking organizations […]to actively monitor the liquidity risks inherent in such funding sources, and establish and maintain effective risk management practices.’
The spokesperson has confirmed that the potential buyers are in a position to decide which former clients of Signature Bank they want to keep after the acquisition. Interestingly, according to Barney Frank, a member of the Signature Bank board and a former Congressman, the regulators shut down the bank to send a message to crypto investors that “crypto is toxic.”