Is Signature Bank the FDIC canary in the crypto banking coal mine? [83]
The FDIC said that it didn’t ask the buyer of Signature to quit crypto but we know how it is
Good afternoon, friends!
You’d have to be hiding under a very large, very solid rock these past few weeks in order to miss the recent banking crisis and the banks that have been literally going kaput. We should know the last Ask Doctor Bitcoin was literally dedicated to the whole affair.
To briefly recap, a number of major banks crumbled including Silicon Valley Bank and crypto-friendly banks Silvergate Bank and Signature Bank – the latter of which we’ll discuss here.
Signature Bank was captured by the FDIC in the wake of the collapse of Silicon Valley Bank on the pretext that doing so would help prevent further bank runs even though its board members said that it was doing just fine. In fact, at the time one of its board members, former congressman Barney Frank, commented that it seemed as if regulators had targeted the bank specifically due to its focus on crypto assets.
In fact, Signature is the second bank noted above that worked with crypto companies – the other being Silvergate. At the time he said that it was most likely a message being sent that the banking system shouldn’t be working with crypto companies. Some might take this to be a little on the nose conspiracy theory, especially for the timing, especially given how anti-crypto the traditional banking system is itself and the need to label any bank “crypto friendly” in the first place.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank told CNBC. “We became the poster boy because there was no insolvency based on the fundamentals.”
If this were a radio show, and this were a week ago, I would probably wiggle my eyebrows suggestively with a “We’ll let you decide.”
Of course, the FDIC was quick to deny these allegations stating that the regulators do not have any interest in telling any upcoming buyer of Signature what to do with the bank after they purchase its assets. They merely want to make certain that the banking system is stable, after all. They’re stalwart defenders of the system doing their duty.
Of course, that was also a week ago.
Now the FDIC has announced that it will allow New York Community Bankcorp’s Flagstar Bank to take over all of Signatures cash deposits – except those belonging to crypto businesses. I think I remember saying something about being a little on the nose about theories but perhaps Frank wasn’t that far off the mark.
In the end, it doesn’t matter that the FDIC is claiming to be “hands off” crypto, when the buyer that it found to buy the assets of Signature that it grabbed up won’t actually take over the deposits of crypto customers. Which means that they will have to go find a different bank for their deposits. Especially in a continuing hostile market for their assets.
The end result is completely the same.
Where will those clients go? It’s hard to say, there aren’t many banks willing to take on crypto clients – who are considered somewhat of a higher risk profile – but almost any port will do in a storm. There’s a good chance that many of those customers will try to find something overseas, unsecured or elsewhere away from US regulators, or attempt what Tether allegedly did and set up shell accounts in order to get bank accounts.
This should highlight the crux of the problem, nobody should be at the mercy of the banking system. Certainly not when there is the opportunity to break free with decentralized finance and crypto. Banks are an unsustainable concept; this is just another death rattle.
As usual, keep reading below for more news about what happened over the week with the Bulletin and a deeper dive into some of the news that wasn’t discussed here. See you on the flip side everyone.
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Blockchain Bulletin
Microsoft testing Web3 wallet for Edge. Screenshots leaked on Twitter reveal that Microsoft may be planning to add a Web3 wallet integration to the Edge web browser that includes Coinbase and Moonpay as platforms, reported CoinTelegraph.
Authorities shut down ChipMixer and seize $42M in Bitcoin in ‘raid’. U.S. and European authorities shut down another bitcoin mixing service said to be connected with cybercrime and seized $42.2 million in bitcoin in the process, reported Decrypt.
Blockchain Behind the Scenes
FDIC denies report that Signature Bank buyer must give up on crypto. After the FDIC took over Signature Bank it was reported that it would require any buyer to give up on crypto, the Federal outfit has denied that claim.
Salesforce launches platform for businesses to build NFT loyalty programs. Customer relationship management software firm Salesforce has launched a Web3 and NFT minting and management platform for businesses to create their own loyalty programs using crypto assets.
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