Signature Bank, the crypto-linked bank, is up for sale by the Federal Deposit Insurance Corporation (FDIC) after its collapse. The FDIC has asked interested buyers to acquire the bank, with one major caveat: no crypto. This comes just two days after the collapse of California-based Silicon Valley Bank (SVB) and less than a week after the Silvergate Bank collapsed. All three banks were crypto-linked financial institutions, making their failure a significant concern for the broader cryptocurrency market.
According to the FDIC, interested banks need to submit their bids by March 17. This effort indicates the regulators’ attempt to return the collapsed banks to the private sector amid a weekend of turmoil reflecting through the global financial system. The FDIC is ready to sell both SVB and Signature in its entirety, and “offering for parts of the banks could be considered if whole company sales do not happen.”
The eligibility for the purchase of these banks is decided, as only bidders with an existing bank charter will be allowed to study the banks’ financials ahead of submitting their offer. This move gives traditional lenders an advantage over private equity firms. Specifically, for Signature Bank buyers, they are required to “give up all the crypto business at the bank.” The sources requested anonymity as the matter is confidential.
Late Sunday, Signature Bank was closed by state regulators, and now the potential buyer for the bank is being sought. Notably, this was the second attempt by the FDIC to sell SVB, and since it failed on Sunday, the regulators reportedly retained investment bank Piper Sandler Companies (PIPR.N) to execute the new auction.
As per the report, the sources declined to comment, both on their own behalf and for SVB; however, the U.S. President Joe Biden said that “U.S. taxpayers will not bear the cost of salvaging SVB and Signature bank. As any capital shortfalls would be covered by a government fund that can place a levy on other banks.” If the sales of these banks go well, it would help minimize similar shortfalls in the future.
The New York financial regulator said on March 14 that Signature Bank was shuttered due to “a significant crisis of confidence in the bank’s leadership.” Late in September, nearly a quarter of the bank’s deposits came from the crypto industry, which indicates that the bank was heavily involved in it. The move to ask the Signature Bank buyer to give up all crypto business does not bode well for the cryptocurrency industry as a whole.
While the FDIC’s move is understandable, it could potentially harm the growth and development of the crypto industry, which is already facing significant challenges. Many traditional banks are still wary of the cryptocurrency market, citing regulatory and legal issues, and this step by the FDIC could give them further reason to stay away.
Furthermore, the move could send a message to other banks and financial institutions that the risk associated with crypto is too significant for them to get involved. The cryptocurrency industry needs more support and institutional adoption to mature and grow. The FDIC’s move could also indicate a heightened level of regulatory scrutiny, which could become an obstacle to innovation in the industry.
In conclusion, the sale of Signature Bank is a significant development in the crypto industry’s history. While it remains to be seen how this move will affect the broader cryptocurrency market, it is essential to note that the industry needs support and institutional adoption to grow. The FDIC’s move to ask the buyer to give up all crypto business is a step back for the industry, but it could also indicate a heightened level of regulatory scrutiny that may bring more stability to the crypto market in the long term.
