- The Federal Deposit Insurance Corporation has given a deadline to crypto depositors stranded by defunct Signature bank.
- FDIC is trying to hurry the stranded crypto customers’ exit from the temporary entity holding the bank’s assets.
- The agency has been reaching out to customers connected to the money, encouraging them to transfer their funds to another bank.
The Federal Deposit Insurance Corporation (FDIC) has asked crypto customers exposed to the defunct Signature bank to exit by next week, whether they have a new bank or not. The agency is trying to expedite the process for stranded cryptocurrency customers to leave the temporary organization that is currently managing assets belonging to the now-collapsed Signature bank.
Cash out by next week, whether you have a new bank or not
After asking them to stop all crypto businesses, the FDIC has been appealing to customers with financial exposure to Signature bank, urging them to find another bank where there can move their funds to.
Notably, the US government’s salvage of depositors of the Signature bank is expected to cost the FDIC’s insurance fund approximately $2.5 billion, inclusive of the uninsured deposits characteristic of crypto clients.
KEEPING TRACK:— Caitlin Long ⚡️ (@CaitlinLong_) March 28, 2023
+ FDIC deposit insurance fund: $128.2 billion
- Signature cost: ~$2.5 billion
- SVB cost: ~$20 billion
= FDIC balance: $105.7 billion
* Total insured deposits: $10.1 trillion
* Total US commercial bank deposits: $17.5 trillion pic.twitter.com/SFpBJfWWAy
The expedition comes as the FDIC sold what was left from Signature bank to New York Community Bancorp. However, in the sale agreement, the deal did not contain some $4 billion worth of crypto-linked deposits or the defunct bank’s Signet real-time transactions platform.
Notably, the US banking regulator is still looking for a buyer for the Signet platform, with plans to have the deposits cleared by April 5, 2023.
FDIC TELLS SIGNATURE CRYPTO CLIENTS ACCOUNTS TO CLOSE BY APRIL 5 - BLOOMBERG NEWS— First Squawk (@FirstSquawk) March 28, 2023
Despite the short timeline, the agency has given an alternative, committing to transfer the funds via a check to whichever address is available on record for individual customers.
Banks increasingly shying off from crypto involvement
There have been concerns among the shipwrecked cryptocurrency clientele, including whether expectations from the Office of the Comptroller of the Currency (OCC) blocked the crypto customers out of the discussion and subsequent purchase deal to NYCB’s Flagstar Bank subsidiary.
However, the FDIC has put down these claims, denying any intentional efforts to isolate the funds. Notwithstanding, whether or not the regulators participated in the strict standards of the OCC in regard to cryptocurrency involvement at the banks it manages makes it very hard for its regulated institutions to establish new businesses linked to the sector.
US regulators, the Federal Reserve included, have invigorated the fear among banks to involve themselves in crypto-related affairs. For instance, before the collapse of Signature bank, concentrated a notable part of its business model on the digital asset sector. However, it started pulling out from that business prior to the collapse.
Accordingly, ‘fear, uncertainty, and doubt (FUD) remains on how easy it is going to be for Signature bank’s past clients to find new lenders that will take their business within a week’s time.
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