The Federal Deposit Insurance Corporation (FDIC) of the United States reportedly requested that possible buyers of insolvent U.S. banks Signature refrain from supporting crypto services and give up all cryptocurrency business at the bank.
According to Reuters, the FDIC has requested banks interested in acquiring insolvent U.S. banks such as Silicon Valley Bank (SVB) and Signature Bank to make bids by March 17.
The authority would only accept offers from banks with an existing bank charter, giving preference to traditional lenders over private equity groups, according to two persons familiar with the situation cited in the report. The FDIC intends to sell the whole businesses of both SVB and Signature, but proposals for portions of the banks will be entertained if this is not possible.
The FDIC has also demanded that any purchaser of Signature agree to cease any cryptocurrency transactions with the bank.
New York-centric Signature is a large U.S. bank that supports cryptocurrencies. The bank is notable for its various collaborations in the cryptocurrency industry, supporting companies such as Coinbase exchange, stablecoin issuer Paxos Trust, cryptocurrency custodian BitGo, and insolvent cryptocurrency lender Celsius.
The announcement follows U.S. Representative Tom Emmer’s letter to the FDIC, in which he expresses worry that the federal government is “weaponizing” banking industry issues to target cryptocurrencies.
In a letter to FDIC Chairman Martin Gruenberg, Emmer stated, “These attempts to weaponize recent turmoil in the banking sector, precipitated by catastrophic government expenditures and unprecedented interest rate hikes, are profoundly improper and could lead to broader financial instability.”
On March 12, the New York State Department of Financial Services formally liquidated Signature and appointed the FDIC as the 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 will be operated by the FDIC while the institution is marketed to prospective buyers.
According to former U.S. House of Representatives member Barney Frank, New York regulators shuttered Signature Bank notwithstanding the absence of insolvency.
Frank hypothesized that the action was a “very powerful anti-crypto message” intended to demonstrate force over the crypto business. However, the FDIC stated in January that it does not restrict or discourage banks from providing services to “any specific class or kind of consumer, as permitted by law and regulation.”
Subsequent reports stated that Signature’s CEO Joseph DePaolo and CFO Stephen Wyremski committed fraud by fraudulently declaring the bank was “financially solid” just three days before to its closure. According to reports, the bank has also been investigated for possible money laundering.