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Did FDIC ask Signature buyers to stop all crypto business?

A United States Federal Deposit Insurance Corporation (FDIC) spokesperson has denied a suggestion that any buyer of Signature Bank would be required to divest crypto activities as part of a potential rescue plan.

A March 17 report from Reuters cited two sources that said that any buyer of Signature to give up all cryptocurrency business at the bank. However, an FDIC spokesperson told Reuters that the agency would not require divestment of crypto activities as part of any sale.

The spokesperson also pointed to prior comments from FDIC chairman Martin Gruenberg that the agency is not looking to prohibit any particular activity by banks, according to Reuters. 

The FDIC regulators have asked banks interested in acquiring failed U.S. lenders like Silicon Valley Bank (SVB) and Signature Bank to submit bids by March 17.

The authority will only accept bids from banks with an existing bank charter, prioritizing traditional lenders over private equity firms, the report notes, citing two sources familiar with the matter. The FDIC aims to sell entire businesses of both SVB and Signature, while offers for parts of the banks could be considered if the whole company sales do not happen.

New York-based Signature is a major crypto-friendly bank in the United States. The bank is known for many partnerships in the crypto industry, servicing companies like Coinbase exchange, stablecoin issuer Paxos Trust, crypto custodian BitGo, and bankrupt crypto lender Celsius — among others.

The news comes amid 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.

“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer said in the letter to FDIC chairman Martin Gruenberg.

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 the deposits and most of the assets of Signature Bank to Signature Bridge Bank, a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.

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According to Barney Frank, a former member of the U.S. House of Representatives, New York regulators closed Signature Bank despite no insolvency. 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.”

Later reports suggested that Signature CEO Joseph DePaolo and chief financial officer Stephen Wyremski allegedly committed fraud by falsely claiming the bank was “financially strong” just three days before it was shut down. The bank has also reportedly been investigated for alleged money laundering.

Update March 16, 10:53 pm UTC: Updated to reflect a new comment given by an FDIC spokesperson to Reuters.

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