One of the crypto sector’s favorite banks, Signature, has a new home.
As of Monday (March 20), the former crypto-friendly lender’s doors are open again across its 40 branches. Unfortunately for the digital asset industry, however, the doors to its crypto business look to be permanently shut.
While the Federal Deposit Insurance Corporation (FDIC) denied reports that any buyer of Signature Bank would need to divest its crypto business, the buyer, New York Community Bancorp-owned Flagstar Bank, did anyway.
This, as the FDIC noted in a press release announcing the sale, that Flagstar Bank’s bid for Signature Bank did not include around $4 billion of deposits tied to the failed institution’s digital banking business.
“The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business,” the agency said in a Sunday (March 19) announcement.
The shuttering of both Silvergate Bank, which voluntarily liquidated, and Signature Bank, which failed, has made it increasingly difficult for crypto platforms and investors to transfer traditional currencies by closing two critical banking on-ramps for the digital asset industry.
Read More: Banking Crisis Contagion Spreads to Crypto
Signature’s Signet platform, which was invaluable to the crypto industry for years — allowing 24/7 real-time payments outside of traditional banking hours — remains under FDIC receivership and subject to later arrangement. It is unclear what plans exist for the platform to come back online as an ongoing service.
“The FDIC estimates the cost of the failure of Signature Bank to its Deposit Insurance Fund to be approximately $2.5 billion. The exact cost will be determined when the FDIC terminates the receivership,” stated the press release announcing Signature’s sale, which separately highlighted that to mitigate that cost, “the FDIC received equity appreciation rights in New York Community Bancorp, Inc., common stock with a potential value of up to $300 million.”
Unlike Signature, Silicon Valley Bank (SVB) has yet to find a home. The FDIC on Monday (March 20) announced it would hold two separate auctions for SVB’s traditional deposits unit and the lender’s private bank business after failing to find a buyer last week.
Bidding for SVB’s private bank, which caters primarily to high-net-worth customers, has been extended through Wednesday (March 22), while potential buyers have until Friday (March 24) to submit a bid for the bridge bank.
A March 13 report on bank fragility by a team of economists noted that 186 banks across the U.S. could be vulnerable to the same pressures as the collapsed Signature Bank and SVB.
As reported by PYMNTS, the global banking market has lost nearly half a trillion dollars in market value this March alone.
The traditional finance sector’s wobbles have seen the price of Bitcoin rebound from earlier lows to reach $28,000, its highest mark since last summer, as investors turn back to crypto in the face of banking instability.
Former Coinbase Chief Technology Officer Balaji Srinivasan offered a glimpse of the crypto hype of yesteryears by announcing on Twitter a $2 million bet that bitcoin will hit $1 million in the next three months.
But can cryptocurrencies recapture broader trust and capitalize on the cracks in the traditional banking system?
The industry will have to do a little better than crypto exchange Binance’s 14-page response to a bipartisan letter sent by U.S. Senators Elizabeth Warren (D-Massachusetts), Chris Van Hollen (D-Maryland), and Roger Marshall (R-Kansas) requesting further clarity into the opaque exchange’s operations and answers around its finances.
The lawmakers demanded that Binance produce copies of its balance sheets starting from 2017, as well as data on the number of U.S. users by year, copies of internal policies relating to anti-money laundering and know-your-customer compliance procedures, among other information pertinent to the exchange’s operations.
Binance once again demurred. The company responded to the request by the March 16 deadline but reportedly offered “scant details” around its finances, doing little to quell ongoing concerns that its crypto platform serves as a “hotbed” of illegal activity.
A representative for Binance did not immediately reply to PYMNTS’ request for comment.
Binance’s response comes after a U.S. bankruptcy judge moved forward with the exchange’s embattled quest to acquire Voyager Digital, despite objections from both federal and state regulators, representing a victory for the platform and, per the judge, Voyager customers.
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