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- 1 The FDIC requires potential owners of a bankrupt institution to give up its cryptocurrency operations.
- 2 The FDIC continued to run the Signet platform for Signature despite the ambiguity.
- 3 FDIC is reportedly looking into Signature’s activity with crypto clients.
Even after the US financial regulator Federal Deposit Insurance Corporation (FDIC) took receivership of the Signature bank over the weekend, Signature Bank remained one of the industry’s few remaining financial choices in the United States.
According to a Wednesday report from Reuters, the FDIC now requires potential owners of the bankrupt institution to agree to give up the bank’s cryptocurrency operations.
The circumstances behind the demise of the New York-based bank have sparked debate in the US crypto community. Signature Bank was one of the few American banks that would provide financial services to blockchain startups. Its real-time payment processor Signet, is also used by companies like USDC issuer Circle to process transactions after business hours.
Why the “anti crypto” agenda?
The announcement coincides with U.S. Representative Tom Emmer’s letter to the FDIC, in which he expresses concern that the federal government is “weaponizing” problems in the traditional banking sector to target cryptocurrency.
In the letter to FDIC chairman Martin Gruenberg, Emmer argued that these efforts to weaponize recent banking sector instability, which was brought on by disastrous government spending and unheard-of interest rate increases, were wholly improper and might trigger wider financial instability.
On March 12, Signature Bank was formally shut down and taken over by the New York State Department of Financial Services, who named the FDIC as receiver. To protect depositors, the FDIC transferred all of Signature Bank’s deposits and the majority of its assets to Signature Bridge Bank, a full-service bank that the FDIC will run while seeking a buyer for the institution.
Barney Frank, an ex-congressman who worked on the Dodd-Frank Act, claimed earlier this week on CNBC that the bank’s closure was done to send “a very strong anti-crypto message” by financial regulators. Frank was a board member for Signature Bank as well.
The bank failed to deliver trustworthy and consistent data, causing a “significant crisis of confidence in the bank’s leadership,” according to a DFS spokeswoman who refuted the claims.
Despite the denial from DFS, rumours in the crypto community persisted that the takedown of Signature was motivated by its pro-crypto stance, and that the forced failure was a component of a larger regulatory “Operation Choke Point 2.0” to undermine crypto in the United States. This was done in reference to a previous Department of Justice initiative to target banks that worked with specific sectors.
The FDIC continued to run the Signet platform for Signature despite the ambiguity. Circle stopped utilising the processor.
Signature’s Status in Jeopardy?
According to later reports, the chief executive officer of Signature, Joseph DePaolo, and the chief financial officer, Stephen Wyremski, reportedly committed fraud by falsely declaring the bank to be “financially strong” just three days before it was shut down. According to reports, the bank is also being examined for possible money laundering.
According to Reuters, Signature’s status as a bank that supports cryptocurrencies is in jeopardy. Unnamed sources claim that the FDIC intends to sell the whole Signature portfolio using an auction conducted by the investment bank Piper Sandler. Major news organizations reported on Tuesday that U.S. authorities were looking into Signature’s activity with crypto clients prior to the DFS takeover, in addition to any acquirer of Signature having to give up its crypto business.
An inquiry for comments was not immediately answered by the FDIC.
The ruling would probably prevent crypto firms from accessing the vital Signet platform, forcing them to look for alternatives. A news representative told Fortune on Wednesday that if Signet went out of business, there would be other competitors in the market ready with a replacement
Conclusion
During the weekend, the FDIC attempted to sell what was left of Signature, but it was unable to find a buyer prepared to buy the entire bank. According to the sources cited by Reuters, the FDIC would prefer to sell both banks as a whole at auction but will consider offers for individual branches if that strategy fails.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
