Customers of collapsed lender Signature Bank who hold cryptocurrency have been notified by the U.S. Federal Deposit Insurance Corp (FDIC) that they have until April 5 to close their accounts and transfer their funds.
Signature Bank’s rescue arrangement with Flagstar Bank, a New York Community Bancorp subsidiary, did not cover the crypto accounts made earlier this month.
Crypto is not Part of the Signature Bank Deal
40 Signature Bank locations reopened as Flagstar’s property after the agreement on March 19. Flagstar Bank acquired $12.9 billion in debts and $38.4 billion in assets for a $2.7 billion discount.
BeInCrypto previously established that the agreement did not cover $4 billion in deposits made by Signature Bank’s cryptocurrency-related businesses. Along with deposits of web3 firms, the deal has also excluded Signature Bank’s payment network, Signet.
FDIC spokesperson stated, “Those are the deposits we are encouraging customers to move before April 5. If they have not by that day, we will mail checks to the address on record.”
According to reports, the FDIC will continue holding $4 billion in assets from Signature Bank and about $60 billion in loans.
Banks’ Aversion to Crypto and Unclear Rules
Signature Bank is not alone when it comes to eliminating the crypto vertical. Reports confirmed that the acquisition agreement for the Silicon Valley Bank by First Citizens excluded cryptocurrencies and loans backed by digital assets from the purchase agreement.
Barney Frank, a former U.S. representative on the board of Signature, told the Financial Times why this could be happening. He said that the banks were reacting to a rise in regulatory hostility towards cryptocurrencies. This followed the collapse of the digital exchange FTX last November.
Meanwhile, Galaxy Digital CEO Mike Novogratz wants regulators to discuss A.I. rules rather than cryptocurrencies. At the company’s fourth-quarter call, he said,
“When I think about A.I., it shocks me that we’re talking so much about crypto regulation and nothing about A.I. regulation. I mean, I think the government’s got it completely upside-down.”
However, according to the New York State Financial Services Department, Signature Bank’s closure was not brought on by crypto. According to the state regulators, the bank’s executives failed to provide reliable and consistent information. Therefore, the choice was based on a lack of transparency rather than crypto.
In a recent piece, Katie Haun, founder of Haun Ventures and a member of the Coinbase board, discussed how American financial regulators are purposefully suppressing the cryptocurrency industry. Silvergate, Silicon Valley Bank, and Signature bank were the recent high-profile collapses.
However, the head of the Basel Committee on Banking Supervision believes that international standards meant to limit banks’ crypto holdings may be revised depending on the market. But, it remains to be seen if rescued entities like Signature Bank would treat crypto customers differently in the future. New capital regulations could come into force by the start of 2025, according to Chair Pablo Hernández de Cos.
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