The United States’ Federal Deposit Insurance Corporation (FDIC) has reportedly asked potential rescuers of several failed US banks to stop supporting crypto services.
The FDIC regulator asked banks interested in acquiring failed US lenders like Silicon Valley Bank and Signature Bank to submit bids by March 17, Reuters reported.
The authorities will only accept offers from banks with existing bank charters, prioritizing traditional lenders from private equity firms, the report notes, citing two sources familiar with the matter. The FDIC is targeting a sale of all of SVB and Signature’s businesses, while an offer for the bank’s portion could be considered if an entire sale of the company does not occur.
The FDIC also required Signature’s buyer to agree to divest all of the bank’s cryptocurrency business.
New York-based Signature is the leading crypto-enabled bank in the United States, holding at least $3.3 billion in assets Circle, which issued USD Coin (USDC), the second largest stablecoin by market capitalization at the time of writing. The bank is known for its many partnerships in the crypto industry, also serving companies like Coinbase exchange, stablecoin publisher Paxos, crypto custodian BitGo, bankrupt crypto lender Celsius and others.
The news comes amid US Representative Tom Emmer sending a letter to the FDIC, expressing concern that the federal government is “weaponizing” issues surrounding the banking industry in search of crypto.
“These actions to combat the new instability in the banking sector, manifested by dangerous government policies and unprecedented interest rate increases, are inappropriate and could lead to more financial instability,” Emmer said in a letter to FDIC chairman Martin Gruenberg.
Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is fighting new instability in the banking sector to clean up legal crypto activity from the US pic.twitter.com/fDmaA0XGWv
– Tom Emmer (@GOPMajorityWhip) March 15, 2023
The New York State Department of Financial Services officially closed and took over Signature on March 12, appointing the FDIC as receiver. To protect depositors, the FDIC is transferring all of Signature Bank’s deposits and all of its assets to Signature Bridge Bank NA, 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 US House of Representatives, New York regulators shut down Signature Bank even though there was no insolvency. Frank speculated that the move was to demonstrate power in the crypto industry, a “very strong anti-crypto message.” However, the FDIC in January said it does not prohibit or restrict banking organizations from providing banking services to customers of “certain classes or types, 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 closing. The bank is also reportedly under investigation for alleged money laundering.