Signature’s Seized Assets Sold Without Crypto – Here’s Why It Matters
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When Signature Bank shut down, it was a massive blow to the crypto industry. Just a few days after Silvergate Bank decided to “wind down” its business, Signature’s seizure meant that many crypto companies had effectively been wound up.
Few remain and none have been eager to pick up the slack.
New York regulators shut down Signature and turned it over to the FDIC because management “failed to provide reliable and consistent data, creating a significant crisis of confidence.”
It was announced that the buyers of the assets would not be bidding on crypto assets.
They would simply be returned to their owners, the FDIC said.
That led to complaints that forced the FDIC to back down, with Reuters reporting that the FDIC had told potential bidders that “any buyer of Signature must agree to divest all crypto operations at the bank.”
In response, the FDIC told Reuters that “the agency would not require divestment of crypto activities as part of any sale.”
But to no one’s surprise, when New York Community Bancorp’s Flagstar Bank division’s successful bid for Signature’s $88.6 billion in deposits and 40 branches was announced, it had excluded $4 billion in crypto company deposits.
Which means two things. First, it will be much more difficult for all but the largest crypto company’s customers to deposit and deposit their money in dollars.
And two, the other companies will have trouble doing basic, day-to-day things like payroll.
The charge that regulators’ shutdown of Signature was a deliberate message to crypto companies appeared to be gaining traction.
That had been done by board member Barney Frank, a highly respected former congressman who co-authored the Dodd-Frank Act that tightened regulations on banks after the 2008 financial crisis.
The bank was seized and closed despite stabilizing its finances, “to send a message to get people away from crypto,” Frank said. “We were singled out as the poster child for that message.”
Something federal banking regulators have been openly pushing banks to do for some time now.
The Wall Street Journal editorial board agreed with Frank, saying on March 20 that the FDIC had “all but confirmed[ed] it closed the bank over crypto.”
David Marcus, CEO of Bitcoin Lightning Network payments firm Lightspark and head of Meta’s failed attempt to launch the Libra/Diem cryptocurrency, tweeted:
Now it seems that the message has been received and it will become more difficult to get funds in and out of crypto.
