FDIC Imposes Ban on Business with Cryptocurrency Customers for Bidders of Closed Signature Bank Auction
The Federal Deposit Insurance Corporation (FDIC) has set a new requirement prohibiting the continuation of business relationships with cryptocurrency customers for bidders in the acquisition auction of the closed U.S. Signature Bank.
This decision is expected to deepen the skepticism of industry insiders, who have been growing increasingly doubtful due to the recent closures of three banks closely related to the cryptocurrency industry.
As of December 31, 2022, Signature Bank has total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion. As of the end of September 2019, the share of deposits made by cryptocurrency customers accounted for about one-fourth. The closure of Signature Bank was carried out by the New York State Department of Financial Services (NYDFS) on the 12th in the name of avoiding a financial system crisis caused by the collapse of Silicon Valley Bank.
Experts, including former Republican congressman Barney Frank, have expressed skepticism about the NYDFS’s response. Brian Brooks, former Acting Commissioner of the Office of the Comptroller of the Currency (OCC) and one-time CEO of Binance.US, also said the Signature Bank closure was a concerted effort by regulators to keep the crypto industry out of the banking system.
In response to this tone, NYDFS Supervisor Adrienne Harris explained that cryptocurrencies are not a factor in the closure of Signature Bank. She said it was “due to a crisis of confidence in the bank’s leadership and not because of any particular industry.”
Furthermore, on March 8, US-based Silvergate Capital, which provides cryptocurrency-related services, announced that it plans to voluntarily liquidate its banking business and shrink its business. Silvergate Bank’s payment network “Silvergate Exchange Network (SEN)” was popular as a means for institutional investors to send money to cryptocurrency exchanges.
The closure of these banks has raised concerns about the stability of the cryptocurrency industry and its relationship with traditional financial institutions. The FDIC’s new requirement banning cryptocurrency customers for bidders in the acquisition auction of Signature Bank may be seen as a further indication that regulators are tightening their grip on the industry.
The Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) have also been investigating Signature Bank for possible money laundering before it was shut down. In February, a class action lawsuit was filed against Signature Bank, accusing it of facilitating FTX’s fraud. Plaintiffs primarily allege that Signature Bank was aware that FTX was misappropriating customer funds and allowed them to use its payment network.
Overall, the closure of Signature Bank and other related banks, along with the new requirement set by the FDIC, are likely to have a significant impact on the cryptocurrency industry and its relationship with traditional financial institutions. It remains to be seen how the industry will respond to these developments and how regulators will continue to regulate the industry in the future.
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