Did the FDIC tell signature buyers to stop all crypto business?

by · March 16, 2023

A spokesperson for the Federal Deposit Insurance Corporation (FDIC) in the US has rejected a suggestion that any buyer of Signature Bank would be required to divest crypto activities as part of a potential bailout.

A March 17 report from Reuters cited two sources as saying that any buyer of Signature would have to abandon all cryptocurrency operations at the bank. However, an FDIC spokesperson told Reuters that the agency would not require divestment of crypto activities as part of any sale.

The spokesman also pointed to earlier comments by FDIC Chairman Martin Gruenberg that the agency does not want to ban any particular activity by banks, according to Reuters.

FDIC regulators have asked banks interested in acquiring failed US lenders such as Silicon Valley Bank (SVB) and Signature Bank to submit bids by March 17.

The authority will only accept bids from banks with existing bank charters, 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 may be considered if the entire company’s sale does not take place.

New York-based Signature is a major crypto-friendly bank in the US. The bank is known for many partnerships in the crypto industry, serving companies such as Coinbase exchange, stablecoin issuer Paxos Trust, crypto custodian bank BitGo and bankruptcy lender Celsius – among others.

The news comes as US Representative Tom Emmer sends a letter to the FDIC, expressing concern that the federal government is “weaponizing” problems surrounding the banking industry to go after crypto.

“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer said in the letter to FDIC Chairman Martin Gruenberg.

The New York State Department of Financial Services officially shut down and took over Signature on March 12, naming the FDIC as receiver. To protect depositors, the FDIC transferred all of 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.

Related: Silvergate, SBV collapse ‘definitely good’ for Bitcoin, Trezor CEO says

According to Barney Frank, a former member of the US House of Representatives, regulators in New York closed Signature Bank despite no insolvency. Frank speculated that the move was to demonstrate power over the crypto industry, as a “very strong anti-crypto message.” However, the FDIC said in January that it did not 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 CFO Stephen Wyremski allegedly committed fraud by falsely claiming the bank was “financially strong” just three days before it closed. The bank is said to have also been investigated for alleged money laundering.

Update March 16 at 22:53 UTC: Updated to reflect a new comment provided by an FDIC spokesperson to Reuters.