Mar 16, 2023

FDIC Urges Banks to Reject Crypto Services

The U.S. Federal Deposit Insurance Corporation (FDIC) has reportedly requested that potential purchasers of failed U.S. banks, including Silicon Valley Bank (SVB) and Signature Bank, do not offer crypto services.

The FDIC, which is responsible for selling entire businesses of both SVB and Signature, has asked banks interested in acquiring these lenders to submit bids by March 17. Traditional lenders are being prioritized over private equity firms, according to two sources familiar with the matter. If whole company sales do not occur, offers for parts of the banks may be considered.

In addition, any buyer of Signature must agree to give up all cryptocurrency business at the bank. Signature is a major crypto-friendly bank in the United States, and is known for many partnerships in the crypto industry, such as Coinbase exchange, stablecoin issuer Paxos Trust, crypto custodian BitGo, and bankrupt crypto lender Celsius.

The news has led to U.S. Representative Tom Emmer sending a letter to the FDIC, expressing concerns that the federal government is “weaponizing” issues around the banking industry to go after crypto. He believes that these actions could lead to broader financial instability.

The New York State Department of Financial Services officially closed down and took over Signature on March 12, appointing the FDIC as the receiver. To protect depositors, the FDIC transferred all deposits and most of the assets of Signature Bank to Signature Bridge Bank, which will be operated by the FDIC as it markets the institution to potential bidders.

Former U.S. House of Representatives member Barney Frank speculated that the action was to demonstrate force over the crypto industry, being a “very strong anti-crypto message.” However, the FDIC in January said that it didn’t prohibit or discourage banking organizations from providing banking services to customers of “any specific class or type, as permitted by law or regulation.”

Signature Bank has also been accused of fraud and money laundering. Its CEO Joseph DePaolo and chief financial officer Stephen Wyremski allegedly falsely claimed the bank was “financially strong” just three days before it was shut down.

The FDIC’s request to potential rescuers of U.S. banks not to support any crypto services has sparked debate in the web3 space. The news has also raised questions about the future of NFTs and crypto marketing.

NFTs have grown in popularity in recent months, with many companies using them to promote their products and services. NFT marketing is a great way to engage with customers, but it may become difficult to do so if banks are not allowed to offer crypto services.

Twitter NFT marketing is also becoming increasingly popular, with many companies using it to promote their NFTs. The news could make it difficult for companies to use Twitter to promote their NFTs, as the platform is heavily reliant on banks for payments.

NFT marketing agencies and web3 agencies may also find it difficult to do business if banks are not allowed to offer crypto services. Selling NFTs could become difficult as well, as banks are used to process payments.

The news has certainly caused a stir in the web3 space, and it remains to be seen how this will affect the crypto and NFT industry.

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