Crypto customers have been put on alert and given a deadline to vacate the assets of the former Signature Bank before the Federal Deposit Insurance Corporation (FDIC) takes further action.
Signature Bank has been a major player in the American crypto scene, with at least $3.3 billion in assets of Circle alone, and partnerships spanning Coinbase exchange, Paxos, BitGo and Celsius. But on March 12, the New York State Department of Financial Services (NYDFS) took over Signature and appointed the FDIC as receiver.
In the wake of this takeover, the U.S. banking regulator is now pushing customers to cash out all crypto-related deposits, estimated at around $4 billion, by April 5. To force out financial service customers, the FDIC has asked any potential buyers of Signature to close off crypto services at the bank.
But is this really a result of the FDIC’s anti-crypto sentiments? Not according to Gruenberg and a spokesperson for the FDIC. They claim that the decision not to include crypto deposits in the Signature sale to New York Community Bancorp’s Flagstar Bank subsidiary was simply to ensure security and soundness.
At the same time, the FDIC has encouraged other customers to look elsewhere, such as other banks, in order to transfer their funds. Those who can’t find a new spot will be issued a check to whatever address is on record for the customer.
The FDIC’s action has raised concerns about the fate of the crypto industry in the United States, with U.S. Representative Tom Emmer warning against “weaponizing” issues in the banking sector towards crypto. Meanwhile, Barney Frank, a former member of the U.S. House of Representatives, suggested that the NYDFS action to shut down Signature Bank could be a “very strong anti-crypto message.”
However, the FDIC has denied any deliberate effort to shut down cryptocurrency services. Instead, the agency claims that its regulated institutions such as banks and lenders are simply failing to conform to its strict standards, making it difficult to bring forward new business related to the sector.
Despite the FDIC’s friendly demeanor towards cryptocurrency in recent matchups, banks remain wary in the face of continued resistance from the Federal Reserve and other U.S. regulators. This has led to uncertainty in the crypto sphere, questioning just how easy it will be for Signature’s former customers to find new banking services before the April 5 deadline.
The FDIC’s bold move to seize banking activities at Signature Bank have also prompted an investigation of the failed bank’s former management, which in turn is expected to cost the FDIC’s insurance fund $2.5 billion.
With little time left, customers of the former Signature bank have their work cut out for them. It remains to be seen if the crypto community in the States will be able to move the funds in time and find secure banking services before the FDIC deadline.
