Buyer of Signature Bank Told to Give up Crypto Business by FDIC

The U.S. is becoming increasingly inhospitable for crypto companies.

Man representing Signature bank walking to pit of Piranhas.
  • The FDIC is looking for bidders to buy the fallen Silicon Valley Bank and Signature Bank.
  • One major stipulation from the regulator is to halt any crypto business from Signature Bank.
  • U.S. Regulators have been hard on crypto companies, with these businesses having to contend with a lack of banking options and further regulator intervention.

As the dust settles following the collapse of Silvergate, Signature, and Silicon Valley Bank, U.S. regulators are looking for buyers to pick up the pieces of the fallen institutions

The U.S. Federal Deposit Insurance Corp (FDIC) has asked banks interested in acquiring Silicon Valley Bank and Signature Bank to submit their bids by Friday, March 17. However, according to Reuters, there is a caveat underlying the purchase of Signature. 

“Any buyer of Signature must agree to give up all the crypto business at the bank,” two sources revealed.

While all three of these financial institutions were renowned for servicing the crypto industry, Signature had partnerships in the crypto industry with major companies like Coinbase, Paxos Trust, BitGo, and bankrupt crypto lender Celsius. At the end of September 2022, almost a quarter of its deposits came from the cryptocurrency sector.

A Banking Crisis

Signature Bank was shuttered due to “a significant crisis of confidence in the bank’s leadership,” the New York financial regulator said. The closure has left a hole in the crypto-banking space but also rattled confidence in banking, which faced a collapse in 2008.

U.S. President Joe Biden has said that the taxpayers will not bear the cost of these fallen banks as a government fund would cover any capital shortfalls. The undertaking to cover the loss of funds from the government will most likely put pressure on innovative financial technology as regulators become even more risk-averse.

General fear in the banking sector and increased governmental intervention may raise doubt about the future of startups that turned to these crypto-friendly banks for financial services. Crypto businesses are in a situation where their future in the U.S. is currently up in the air, with overseas jurisdictions looking more inviting.

A Crypto Exodus

The approach from regulators in the U.S. toward crypto has turned quite hostile, as Ripple CEO Brad Garlinghouse has highlighted. The SEC is policing the sector with an iron rod, and a lack of banking options may turn companies to Europe

On the Flipside

  • Coinbase held $240 million at Signature when the bank collapsed, but the FDIC confirmed that those funds would be fully recovered for the exchange’s users. 

Why You Should Care

Not only have the likes of Coinbase and other major crypto institutions lost several banking partners, but it also seems that the regulators at the FDIC are trying to make the future of crypto banking in the U.S. difficult with its ultimatum to the new buyers of Signature. 

Read more about how the banking collapse impacted crypto:
‘We Had No Funds in Silvergate’ Major Exchanges Claim.

Read more about Binance favoring TUSD over BUSD:
Binance’s New Flame TUSD Secures Zero-Fee BTC Trading as BUSD Sinks.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Darryn Pollock

Darryn Pollock is a South African-born, UK-based journalist and content writer for DailyCoin with a focus on regulation and legislation revolving around the cryptocurrency space. He has covered the evolving crypto regulatory space, and examined how the US has approached law-making to offer protection in the growth of innovation. Darryn values traditional journalistic principles of truth, accuracy, independence, fairness, and impartiality, and has a Bachelor of Arts degree in Journalism and Law from Rhodes University in South Africa.