FDIC Tells Signature Bank Crypto Clients To Close Accounts By April 5

Updated: 29 March 2023

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The United States Federal Deposit Insurance Corporation (FDIC) has ordered Signature Bank crypto clients to move their money to other banks and close their accounts by April 5. In a March 28 report by Bloomberg, the regulator’s spokesperson asserted that the FDIC is reaching out to depositors from the collapsed lender’s Signature Bank, whose deposits are not included in Flagstar Bank bid, a unit of New York Community Bancorp’s (NYCBs). This is to confirm that these deposits belonged to digital asset users. The spokesperson said:

“Flagstar’s bid did not include around $4 billion in deposits linked to Signature’s digital-asset business. We are encouraging clients to move those deposits by April 5.”

However, any crypto deposits not transferred or taken out by April 5 will be liquidated, and the regulators will mail the check to the recorded address.

The $4 billion figure is 4.5% of the total $88.6 billion deposits that Signature Banks had last December 31.

Flagstar Bank got into a deal with the FDIC to buy deposits and loans from Signature Bank on March 19. However, the crypto-related stakes weren’t part of the agreement. Under a purchase and assumption agreement, the regulator revealed that Flagstar’s subsidiary would see about $38.4 billion of non-crypto-related deposits and $12.9 billion in loans. Notably, Signature Bank’s 40 branches began operating as Flagstar Bank on March 20, where all the deposits assumed by Flagstar would continue to be insured until the $250,000 insurance limit.

Today, we entered into an agreement with a subsidiary of New York Community Bancorp, Inc., to purchase and assume deposits and assets out of Signature Bridge Bank. Read more ➡️ https://t.co/bSshY93lBh. pic.twitter.com/b9RBvYtGF7

— FDIC (@FDICgov) March 19, 2023

Notably, the depositors who will have their accounts closed will receive a check to their registered addresses. In that, any individual with funds held in Signature Bank but having difficulties transferring them out will at least have their registered addresses up-to-date.

According to the report by Bloomberg, out of the agreement is Signet. Signet, Signature Bank’s payment platform, is powered by blockchain technology to enable real-time payments without any transaction limits or fees. However, as of now, the fate of Signet is unknown.

Signature Bank Closure

On March 12, Superintendent Adrienne A. Harris revealed the abrupt closure of the New York-based Signature Bank. The statement noted that the bank was taken over by the New York Department of Financial Services (NYDFS). The New York regulators took possession of Signature Bank under section 606 of the country’s Banking Law. They appointed the FDIC to handle the insurance processes.

On the other hand, the Federal Reserve noted in a statement on March 12 that the FDIC decided to close the bank. This was in order to protect the United States economy and strengthen public confidence when it came to the banking system.

Reportedly, a senior member of the Treasury asserted that the NYDFS and the Federal reserve’s actions were incorporated to reduce the depositor outflows and prevent further bank runs. He noted:

Our actions today were designed to limit the consequences of the depositor outflows from Silicon Valley and Signature and limit any spillover effects.

Additionally, The Treasury official stipulated that the firms are not being bailed out, and the depositors are being protected. “The operations, the ability to keep payrolls working is essential,” he added.

Upon closure, the Federal Reserve notably asserted that it was backstopping all depositors of Signature bank. It noted:

All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayers.”

Further, the statement noted that the decisio taken will “ensure the U.S. banking system continues to perform its vital role of protecting deposits. Additionally, it would provide access to credit to households and businesses to promote strong and sustainable economic growth.”

However, the banks interested in acquiring Signature Bank’s assets are asked to submit a bid to the FDIC by March 17. Reportedly, the agency only considers bank proposals with an existing bank charter.

FDIC spokesperson denies request to divest crypto activities

On the other hand, in a March 17 report by Reuters, two sources familiar with the source noted that any buyer of Signature to give up all cryptocurrency business at the bank. However, the FDIC spokesperson denied the allegations that any buyer of Signature bank would be required to divest crypto activities as part of any sale.