FDIC Requires Potential Buyers of Failed U.S. Banks to Give Up Crypto Services
The Federal Deposit Insurance Corporation (FDIC) has requested banks interested in acquiring failed U.S. lenders, such as Silicon Valley Bank and Signature Bank, to submit their bids by March 17. The authority has also requested potential buyers to be banks with an existing bank charter, prioritizing traditional lenders over private equity firms. If the whole company sales do not happen, the FDIC may consider offers for parts of the banks. However, the FDIC has required any buyer of Signature Bank to agree to give up all cryptocurrency business at the bank.
New York-based Signature Bank is a crypto-friendly bank in the United States and is known for its many partnerships in the crypto industry, including Coinbase exchange, Paxos Trust, BitGo, and Celsius, among others. However, the FDIC's request to give up all cryptocurrency business may impact Signature Bank's reputation in the crypto industry.
The news comes amid concerns expressed by U.S. Representative Tom Emmer, who wrote a letter to the FDIC expressing his concerns that the federal government is “weaponizing” issues around the banking industry to go after crypto. Emmer believes that such actions to weaponize recent instability in the banking sector are inappropriate and could lead to broader financial instability.
New York regulators closed down and took over Signature Bank on March 12, appointing the FDIC as the receiver. To protect depositors, the FDIC transferred all the deposits and most of the assets of Signature Bank to Signature Bridge Bank, a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders. However, according to Barney Frank, a former member of the U.S. House of Representatives, New York regulators closed Signature Bank despite no insolvency. Frank speculated that the action was to demonstrate force over the crypto industry, being a “very strong anti-crypto message.” The bank has also reportedly been investigated for alleged money laundering.
The FDIC has previously stated that it does not prohibit or discourage banking organizations from providing banking services to customers of “any specific class or type, as permitted by law or regulation.” However, the FDIC's request for potential buyers of Signature Bank to give up all cryptocurrency business may suggest a shift in the regulator's stance towards crypto.
In conclusion, the FDIC's request for potential buyers of failed U.S. banks to give up all cryptocurrency business may have implications for the future of the crypto industry in the United States. It remains to be seen whether other regulators will follow suit in restricting crypto services in the banking industry.