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Starting next week on April 5, Signature Bank will return $4 billion in deposits linked to crypto businesses since they aren’t a part of the NYCB deal.
Amid the fallout of the Silicon Valley Bank earlier this month, US regulators moved to shut down another crypto-friendly bank Signature. In the latest development, Martin Gruenberg, chair of the United States Federal Deposit Insurance Corporation, said that the agency is planning to return $4 billion in deposits linked to Signature Bank’s digital assets banking businesses.
FDIC plans to return these funds as early as next week. On Wednesday, March 29, the US House Financial Services Committee was exploring the response of federal regulators to the recent bank failures.
The FDIC chair responded by saying that the deposits were not part of the bid by the New York Community Bancorp subsidiary, and thus shall be returned by early next week. Currently, there are $4 billion in deposits with Signature Bank tied to digital assets. After returning these funds next week, FDIC plans to close all crypto-related accounts that aren’t a part of the NYCB deal. However, depositors can also move their funds before April 5.
Similar to the digital assets, Gruenberg said that Signature Bank’s payment platform Signet was also not part of the NYCB deal. As a result, the FDIC is currently marketing it to potential buyers.
Earlier this month, the FDIC along with New York financial regulators announced the closure of the crypto-friendly Signature Bank on March 12. The regulators said that the move was necessary to stop the contagion from spreading to the banking sector, especially after the collapse of the Silicon Valley Bank.
Was Crypto the Reason behind Signature Bank’s Shut Down?
Earlier this month in March, US regulators announced the shutdown of two major crypto-friendly banks – Silvergate Capital and Signature Bank. Several lawmakers have tried to push the blame on crypto as the reason behind the banks’ collapse.
However, some lawmakers have also opposed this rhetoric. Nellie Liang, undersecretary for domestic finance at the US Treasury Department, doesn’t believe that crypto had any direct role to play in the collapse of either of the two banks. “I know that Signature had activities involved in digital assets, but I don’t believe that is the main [cause],” she said.
Earlier this week on Tuesday, March 28, the Senate Banking Committee held a hearing wherein Gruenberg said Silvergate Bank had not managed risks adequately thereby leading to its failure.
On the other hand, there’s a strong belief within the crypto community that Operation Choke Point 2.0 is currently underplay by regulators to muzzle the crypto industry.