Following the collapse of Silvergate bank – one of the two main banks providing financial services to crypto platforms – former clients began pivoting to competitor Signature, only for the latter to be seized by U.S. authorities, citing significant liquidity issues.
Faced with a public lack of trust in the banking sector, U.S. authorities decided over the weekend to place Signature Bank in receivership, informing its leadership mere hours before the public announcement was made. The bank was majorly invested in crypto, with over a quarter of all deposits coming from the industry.
The news dealt a blow to many mainstays of the crypto industry, de-pegging Circle’s USDC and causing uncertainty for Coinbase and Paxos, who, among others, had significant assets stashed away at Signature Bank.
The bank and its assets were put up for sale by U.S. authorities, with the caveat that only potential buyers with an existing bank charter were allowed to take a peek at its financials. This led to both the Royal Bank of Canada and PNC Financial Services ultimately deciding against a purchase.
At the time, unnamed sources told Reuters that the FDIC had informed potential buyers that they would be required to divest from the cryptocurrency industry completely.
However, a spokesperson for the FDIC has now denied any such limitation, implied or otherwise. As a result, Reuters has updated its previous article to reflect the FDICs’ refutation.
Instead, the FDIC spokesperson allegedly referred potential buyers to an earlier statement, stating only that dealing with cryptocurrency may be a risk.
‘In light of events that highlight a number of risks associated with crypto–assets and crypto-asset sector participants, the agencies issued a statement in January 2023 addressing key risks and are now issuing a statement related to liquidity risks. In light of these heightened risks, it is important for banking organizations […]to actively monitor the liquidity risks inherent in such funding sources, and establish and maintain effective risk management practices.’
According to the spokesperson, potential buyers of Signature Bank are in a position to declare which assets and former clients they would like to take on. Still, they are neither prohibited nor discouraged from continuing existing business relations with the crypto industry.
The FDIC is currently making a second attempt at selling off Signature after a previous attempt last Sunday.