FDIC Sells Signature Bank To Flagstar, But Crypto Is Excluded

March 23, 2023 6:42 pm Comments

Despite the fact that the FDIC had previously denied a report that it would make the buyer of Signature Bank cease all crypto related operations, it seems like crypto-related deposits still ended up not being part of the deal.

It was just revealed that Flagstar Bank will be set to acquire Signature Bank where Flagstar will take over roughly $38 billion of non-crypto related deposits.

The amount of deposits that were related in crypto amounted to around $4 billion and these were not part of the deal.

Instead, the FDIC shared that the deposits would be transferred back to the customers who opened digital banking accounts.

It is unclear if this decision was made by the FDIC or if it was a request from the buyer of the deal.

CoinTelegraph reports:

“The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business.”
The $4 billion figure amounts to 4.5% of the total $88.6 billion deposits that Signature Bank had as of Dec. 31.

Coinbase, Celsius and Paxos are three crypto firms that recently confirmed having some exposure to Signature Bank.

Last week, a March 17 report from Reuters cited two sources who suggested that any buyer of Signature would be required to divest crypto activities as part of a potential rescue plan.

At the time, an FDIC spokesperson denied this, noting that the agency did not require crypto divestment as part of any sale.

Many investors and speculators believe that there is an agenda to crack down on the crypto industry right now which has largely benefited from the recent banking crisis.

After all, crypto presents an alternative solution for banking where users do not have to rely on an external financial institution.

It also happens to be quite the coincidence that the 2 or 3 major banks that experienced a bankruptcy were all heavily involved in the digital assets industry or held deposits for crypto companies.

As it stands, the FDIC has also shared that the cost of Signature Bank’s failure amounted to be around $2.5 billion for the FDIC.

Many have been concerned if the cost would have to be covered through taxpayer money or not.

Bitcoin.com reports:

The FDIC’s announcement on Monday sparked a discussion on social media, with some speculating that a conspiracy theory had been proven true.

Caitlin Long, founder and CEO of Custodia Bank, tweeted about the news: “They indeed kept out the crypto deposits. Investigation time.” In addition to Flagstar not assuming Signature Bank’s cryptocurrency deposits, the FDIC also noted that the government anticipates losses.

The FDIC estimated the cost of Signature Bank’s failure to its Deposit Insurance Fund to be around $2.5 billion, according to the agency’s announcement.

“The exact cost will be determined when the FDIC terminates the receivership.” In addition, the FDIC extended the bid window for Silicon Valley Bank (SVB) on Monday. Bids for SVB’s private bank are due on March 22, 2023, and bids for the bridge bank, Silicon Valley Bridge Bank, N.A., will be due two days later.

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