FDIC validates concerns that it's cracking down on crypto services
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(Kitco News) - In a move that has validated what many crypto proponents have suspected about the government’s motivations behind its recent takeover of Signature Bank, the Federal Deposit Insurance Corporation (FDIC) has reportedly asked potential rescuers of the beleaguered bank not to support any crypto services.
“The two sources added that any buyer of Signature must agree to give up all the crypto business at the bank,” a report from Reuters said.
An FDIC spokesperson reached out to Reuters after it published the story to refute the allegations that the agency has made such stipulations, saying that the FDIC “would not require divestment of crypto activities as part of any sale.”
This development comes as the FDIC makes a second attempt to sell Silicon Valley Bank (SVB) and Signature Bank after its failed effort on Sunday. Banks interested in acquiring either of the failed lenders have been asked to submit bids by March 17.
The FDIC has retained investment bank Piper Sandler Companies to run the new auction, the sources said. The regulator is looking to sell both SVB and Signature in their entirety, but offers to buy part of the banks may be considered if there are no bids for the whole company.
In an effort to give traditional lenders an advantage over private equity firms, only bidders that have an existing bank charter will be allowed to study the banks’ financials ahead of submitting an offer.
The reported request to discontinue crypto-related activity has validated the concerns of many in the crypto ecosystem, including Tom Emmer (R-MN), Majority Whip of the U.S. House of Representatives, who sent a letter to FDIC chair Martin Gruenberg on Wednesday calling on the FDIC head to answer the question as to whether the agency has specifically instructed banks not to provide services to crypto firms.
“Recent reports indicate that Federal financial regulators have effectively weaponized their authorities over the last several months to purge legal digital asset entities and opportunities from the United States,” Emmer wrote.
The representative cited the recent comments from former House Financial Services Committee chair Barney Frank, co-author of the Dodd-Frank Act, who said during an interview on Monday that the targeted nature of these regulatory efforts is meant to send the message that crypto is toxic and should be avoided.
“If this is the case, 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 wrote.
The fact that the FDIC has made the purchase of Signature contingent upon terminating any crypto services only serves to strengthen the argument that this was a targeted attack on crypto-serving banks, leaving the government's objectivity in question.
Today, Emmer tweeted the Reuters report and specifically quoted the part that says, “Any buyer of Signature must agree to give up all the crypto business at the bank, the two sources added,” without adding any additional comments besides a raised eyebrow emoji.
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Replying to Emmer’s tweet, Jake Chervinsky, chief policy officer for Blockchain Association, said that today, the organization “sent FOIA requests to the Fed, FDIC, and OCC, demanding information about the unlawful debanking of crypto companies.” Chervinsky added that they “are also collecting evidence of debanking,” and provided an email address where those who have been affected by the crackdown can share their story.
According to Chervinsky, “There are troubling reports of crypto companies having their bank accounts closed, often with no notice and no explanation. They've struggled to open new accounts too. This disturbing trend suggests that regulators are trying to cut crypto entirely out of the banking system.”
“To be clear: there is no valid reason to debank crypto companies,” the lawyer emphasized. “They're just like all other law-abiding companies that need bank accounts to operate: they hold dollars to pay rent, salaries, and taxes. If regulators are debanking crypto companies, they're breaking the law.”
Chervinsky said that they have submitted the FOIA requests directly to the regulators in an effort to learn if they are, in fact, forcing banks to close crypto companies' accounts covertly, behind the scenes.
“It can take a long time to get responses to FOIA requests, but we'll pursue them aggressively, and we'll share what we can as soon as we're able,” he wrote. “In the meantime, we need your help. If debanking has directly affected you or your company, we want to know about it.”