FDIC Requests Signature Bank Buyers To Cease Crypto Operations

Potential buyers of Signature Bank must give up all crypto operations under FDIC regulations. Additionally, the FDIC reportedly discourages rescuers of failed U.S. banks from supporting crypto services. According to a Reuters report, the FDIC regulators have requested that banks keen on acquiring failed U.S. lenders, such as Silicon Valley Bank and Signature Bank, present their bids before March 17.

Citing two people who know the situation, the report states that the authority will only consider proposals from banks with a bank charter, prioritizing traditional lenders over private equity groups. According to the report, which cites two persons who know the issue, the government will only consider proposals from banks that already hold a bank charter, giving traditional lenders precedence over private equity firms.

The FDIC requires any potential buyer of Signature bank to give up its crypto operations. NY-based leading US bank in crypto, Signature, holds $3.3B in Circle’s assets, the issuer of USD Coin. The bank has formed multiple collaborations within the cryptocurrency sector. It serves companies like Coinbase, Paxos, BitGo, and defunct Celsius, providing various services in the crypto industry.

Amidst concerns raised by U.S. Representative Tom Emmer has raised concerns about the federal government using banking issues to target cryptocurrency. Recent news sheds light on this matter. Utilizing banking instability for anti-government and anti-interest rate weapons is risky. It may cause wider financial instability.

Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. 👇 pic.twitter.com/fDmaA0XGWv

— Tom Emmer (@GOPMajorityWhip) March 15, 2023

The Crypto Factor In Signature Bank’s Closure

Emmer wrote to FDIC Chairman Martin Gruenberg to inform him that on March 12, Signature was formally shut down and transferred to the New York State Department of Financial Services. As a result, The FDIC was chosen to act as the process’s receiver. FDIC transferred Signature Bank’s deposits and assets to Signature Bridge Bank N.A. to protect depositors’ interests.

The FDIC will operate this new bank as it seeks potential buyers for the institution.Despite not being insolvent, according to former U.S. House of Representatives member Barney Frank, New York regulators forced the closure of Signature Bank. Therefore, Frank believed someone intended to assert dominance over crypto and send a message with the move.

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In January, the FDIC clarified that banks can serve customers based on specific categories as long as it’s legal and regulated.  Authorities accused Signature Bank’s CEO, Joseph DePaolo, and CFO, Stephen Wyremski, of fraud for falsely claiming that the bank was financially stable. The accusations came after the bank closed just 72 hours later. Additionally, authorities are reportedly investigating the bank for suspected money laundering.