Everything But the Crypto: Flagstar brings in the signature bank

One of the crypto sector’s favorite banks, Signature, has one new home.

As of Monday (March 20), the doors of the formerly crypto-friendly lender are open again across its 40 branches. Unfortunately for the digital asset industry, however, the doors to the crypto business appear to be permanently closed.

While the Federal Deposit Insurance Corporation (FDIC) refused reports that any buyer of Signature Bank would have to sell its crypto business, the buyer, New York Community Bancorp-owned Flagstar Bank, did anyway.

This, as the FDIC noted in a press release announcing the sale, that Flagstar Bank’s bid for Signature Bank did not include about $4 billion in deposits tied to the failed institution’s digital banking business.

“The FDIC will provide these deposits directly to customers whose accounts are linked to the digital banking service,” it the agency said in an announcement Sunday (March 19).

The formwork of both Silvergate Bank, which voluntarily liquidated, and Signature Bank, which failed, have made it increasingly difficult for crypto platforms and investors to transfer traditional currencies by shutting down two critical banking services for the digital asset industry.

read more: Banking crisis contagion spreads to crypto

Invaluable to the crypto industry for years, Signature’s Signet platform — which allows for 24/7 real-time payments outside of traditional banking hours — remains under FDIC receivership and subject to subsequent arrangements. It is unclear what plans exist for the platform to return online as an ongoing service.

“The FDIC estimates the cost of the failure of Signature Bank to the deposit insurance fund to be approximately $2.5 billion. The exact cost will be determined when the FDIC closes receivership,” said press release announced Signature’s sale, which separately highlighted that to reduce costs, “FDIC received rights to valuation of the equity capital in New York Community Bancorp, Inc., common stock with a potential value of up to $300 million.”

Unlike Signature, Silicon Valley Bank (SVB) has yet to find a home. FDIC Monday (March 20) announced it would hold two separate auctions for SVB’s traditional deposit unit and the lender’s private banking business after failing to find a buyer last week.

Bidding on SVB’s private bank, which primarily caters to high-value customers, has been extended to Wednesday (March 22), while potential buyers have until Friday (March 24) to bid on the bridge bank.

Bitcoin, Binance Back in the spotlight

A March 13 report on bank fragility by a team of economists noted that 186 banks across the US could be vulnerable to the same pressures as the collapsed Signature Bank and SVB.

As reported of PYMNTS, the global banking market has lost almost half a trillion dollars in market value this March alone.

The traditional financial sector’s wobble has seen the price of Bitcoin rebound from previous lows to $28,000, the highest mark since last summer, as investors return to crypto in the face of banking instability.

Former Coinbase Chief Technology Officer Balaji Srinivasan gave a glimpse of the crypto hype of yesteryear announcement on Twitter a $2 million bet that bitcoin will reach $1 million in the next three months.

But can cryptocurrencies regain wider trust and exploit the cracks in the traditional banking system?

The industry needs to do a little better than crypto exchange Binance’s 14-page response to one two-part letter sent by US Senators Elizabeth Warren (D-Massachusetts), Chris Van Hollen (D-Maryland) and Roger Marshall (R-Kansas) asking for further clarity into the non-transparent stock exchange’s operations and responses to its finances.

The lawmakers required Binance to produce copies of balance sheets from 2017, as well as data on the number of US users by year, copies of internal policies related to anti-money laundering and know-your-customer procedures, among other information relevant to the exchange’s operations.

Binance again rejected. The company responded to the request by the March 16 deadline, but allegedly offered “scarce details” about its finances, doing little to allay ongoing concerns that the crypto platform serves as a “hotbed” of illegal activity.

A representative for Binance did not immediately respond to PYMNTS’ request for comment.

Binance’s response comes after a US bankruptcy judge moved forward with the exchange’s difficult quest to acquire Voyager Digital, despite objections from both federal and state regulators, representing a victory for the platform and, according to the judge, Voyager customers.

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