FDIC Tells Signature Buyers to Stop All Crypto Business: Report
The US Federal Deposit Insurance Corporation (FDIC) has reportedly asked potential rescuers of some failed US banks not to support any crypto services.
FDIC regulators have asked banks interested in acquiring failed US lenders such as Silicon Valley Bank and Signature Bank to submit bids by March 17, Reuters reported.
The authority will only accept bids from banks with existing bank charters, prioritizing traditional lenders over private equity firms, the report notes, citing two sources familiar with the matter. The FDIC aims to sell entire businesses of both SVB and Signature, while offers for parts of the banks may be considered in the event that the entire company’s sale does not take place.
The FDIC has also required any buyer of Signature to agree to divest all cryptocurrency operations at the bank.
New York-based Signature is a major crypto-enabled bank in the US, which has at least $3.3 billion in assets for Circle, which issues USD Coin (USDC), the second-largest stablecoin by market capitalization at the time of writing. Known for many partnerships in the crypto industry, the bank also serves companies such as Coinbase exchange, stablecoin issuer Paxos, crypto custodian BitGo, bankrupt crypto lender Celsius and others.
The news comes as US Representative Tom Emmer sends a letter to the FDIC, expressing concern that the federal government is “weaponizing” problems surrounding the banking industry to go after crypto.
“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer said in the letter to FDIC Chairman Martin Gruenberg.
The New York State Department of Financial Services officially shut down and took over Signature on March 12, naming the FDIC as receiver. To protect depositors, the FDIC transferred all of the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank NA, a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.
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According to Barney Frank, a former member of the US House of Representatives, regulators in New York closed Signature Bank despite no insolvency. Frank speculated that the move was to demonstrate power over the crypto industry, and was a “very strong anti-crypto message.” However, the FDIC said in January that it did not prohibit or discourage banking organizations from providing banking services to customers of “any specific class or type, as permitted by law or regulation.”
Later reports suggested that Signature CEO Joseph DePaolo and CFO Stephen Wyremski allegedly committed fraud by falsely claiming to be “financially strong” just three days before it was shut down. The bank is said to have also been investigated for alleged money laundering.
