FDIC asked Signature buyers to stop all crypto business: Report
The United States’ Federal Deposit Insurance Corporation (FDIC) has reportedly asked potential rescuers of some failed U.S. banks to not support any crypto services.
The FDIC regulators have asked banks interested in acquiring failed U.S. lenders like Silicon Valley Bank and Signature Bank to submit their bids by March 17, Reuters reported.
The authority will only accept bids from banks with an existing bank charter, 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 could be considered in case the whole company sales do not happen.
The FDIC has also required any buyer of Signature to agree on giving up all cryptocurrency business at the bank.
New York-based Signature is a major crypto-enabled bank in the United States, holding at least $3.3 billion in assets of Circle, which issues USD Coin (USDC), the second-largest stablecoin by market capitalization at the time of writing. The bank is known for many partnerships in the crypto industry, also servicing companies like Coinbase exchange, the stablecoin issuer Paxos, the crypto custodian BitGo, the bankrupt crypto lender Celsius and others.
The news comes amid U.S. Representative Tom Emmer sending a letter to FDIC, expressing concerns that the federal government is “weaponizing” issues around the banking industry to go after crypto.
“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer said in the letter to FDIC chairman Martin Gruenberg.
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 New York State Department of Financial Services officially closed down and took over Signature on March 12, appointing the FDIC as receiver. To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank N.A., 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 U.S. House of Representatives, New York regulators closed Signature Bank despite no insolvency. Frank speculated that the action was in order to demonstrate force over the crypto industry, being a “very strong anti-crypto message.” However, the FDIC in January said that it didn’t 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 chief financial officer Stephen Wyremski allegedly committed fraud by falsely claiming to be “financially strong” just three days before it was shut down. The bank has also reportedly been investigated for alleged money laundering.