In its recent statement, the Federal Deposit Insurance Corporation (FDIC) portrays attempts to hurry crypto-related depositors to cash out from the temporary entity holding assets from collapsed Signature Bank.
FDIC’s 7-Day Notice Targets Rushed Clearing of Crypto-related Deposits
FDIC issued a seven-day notice requiring the customers to cash out by April 5. FDIC asked the stranded depositors to utilize the seven days to identify banks where they would remit their crypto-related deposits.
The deadline would apply to all customers whether they would have bank accounts or not. The latter would receive checks dispatched to the addresses linked with the accounts of collapsed Signature bank.
FDIC seeks to clear the deposits by April 5, excluded from the sale of the Signature business to the New York Community Bancorp. Also, the deposits do not include deposits in the Signet platform for executing real-time transactions. Nonetheless, the banking regulator demonstrates attempts to dispose of Signet.
Exclusion of Crypto-Related Deposits from Sale by FDIC Questioned
The FDIC spokesperson revealed that they would transfer the crypto-related funds by reaching out to individuals linked to the money and directing them to secure accounts. The executive of the deposit insurer reiterated plans to issue checks to the recorded address.
Beyond the FDIC attempts to expedite the clearing of the deposits, the community is questioning whether the unrealized expectations by the Office of the Comptroller of the Currency (OCC) led to the exclusion of stranded crypto clientele from the Signature acquisition deal with Flagstar Bank.
FDIC dismissed harbouring deliberate efforts to segregate the crypto-related funds. Regardless of whether the regulator intervened, it is evident that the strict standards OCC has set towards banks considering crypto involvement are leaving the former Signature clientele stranded. In particular, the banks are reluctant to acquire the Signet business and crypto-related deposits.
Resistance to Embrace Volatile Crypto-Related Business Evident in US Banks
The resistance US regulators demonstrate towards digital assets led by the Federal Reserve is leaving the majority of American banks increasingly reluctant to crypto involvement.
The FDIC chair Martin Gruenberg illustrated that Signature Bank revealed signs of exiting from the crypto business despite it constituting a substantial portion of its model. The situation increases the uncertainty that former Signature customers would easily find lenders willing to take the crypto-related deposits by April 5.
Meanwhile, the efforts by the US government to rescue depositors of the embattled Signature Bank, including the uninsured, among them crypto clients, would cost the insurance fund an estimated $2.5 billion.
Gruenberg restated FDIC’s intention to open investigations against the former management of Signature Bank that led to the lender’s sudden failure.
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