Cryptocurrencies, blockchain, NFT and new trends

FDIC seeking Signet buyer, returning Signature crypto deposits next week

Policy • March 29, 2023, 2:31PM EDT |

Quick Take

  • Members of the House Financial Services Committee pressed FDIC Chair Martin Gruenberg over the agency’s handling of crypto following the bankruptcies of Signature Bank and Silicon Valley Bank. 
  • Emmer asked Gruenberg questions about the FDIC’s communication with banks about cryptocurrencies.  

Stay updated on Pro Crypto Ecosystems news by locking ACS tokens with The Block.

Connect/Create Wallet You can unlock at any time.*
No wallet? No problem. You can set one up for free. We recommend Torus for first-time users.
*a 2% locking fee will be added at the time of locking. Learn more about Access Protocol

Members of the House Financial Services Committee pressed Federal Deposit Insurance Corp. Chair Martin Gruenberg over his agency’s handling of Signature Bank’s digital asset-related business. 

The FDIC assumed control of Signature earlier this month after state regulators shut the institution down over bank run concerns. The bank regulatory agency currently controls a ‘bridge bank’ meant to temporarily continue Signature’s services without significant disruption until the bank or its assets can be sold off. 

Gruenberg affirmed that the FDIC would not block a buyer for Signet if part of an acquisition. Another New York bank has agreed to assume a large chunk of Signature’s deposits, though Gruenberg made clear the deal does not include the majority of Signature’s digital asset business.

Pressed by Rep. Andrew Garbarino, R-N.Y., as to why Signature’s digital asset deposits weren’t included in the recent sale, Gruenberg replied that the winning bidder for Signature’s deposits didn’t want them. 

“The winning bid chose not to bid on the digital assets, and there were about $4 billion of those,” said Gruenberg, who added that the agency is in the process of marketing Signet, Signature’s crypto-focused payments network, for sale. 

“It’s my understanding that Signet was not acquired and is in the process now of being marketed,” said the FDIC chair. Gruenberg added that the agency plans to return the $4 billion in crypto-related deposits to customers next week. 

Asked by Rep. Tom Emmer, R-Minn., about Silicon Valley Bank’s digital asset customers, Gruenberg said that the bidder in that case took on all of the failed bank’s deposits, in contrast to the partial bid that the FDIC received for some of Signature’s deposits. 

Government didn’t see crypto causing bank failures

Though Silicon Valley and Signature Banks had digital asset industry customers, regulators have not said that crypto played a role in the bank failures, instead characterizing the failures as similar to traditional bank runs of the past, only faster.

That did not change when asked explicitly if crypto caused those two failures. Pressed on that, Treasury Undersecretary of Domestic Finance Nellie Liang said that the government did not see cryptocurrencies or digital assets playing a role in either bank failure. 

Gruenberg notably did not specifically blame exposure to crypto assets in the failure of Silvergate Bank, which voluntarily shut down after losses from its holding of the stablecoin diem and large customer withdrawals due to scrutiny of its management of accounts held by FTX and Alameda Research.

During testimony on Wednesday he also denied that regulators had told banks that take on digital asset clients that they would be tougher on them, a criticism levied by some crypto advocates, including Emmer, in recent months. 

“Has the FDIC ever communicated implicitly or explicitly to any banks that their supervision will be more onerous in any way if they take on new or maintain existing digital asset clients?” Emmer asked. 

“No,” replied Gruenberg.

New York state regulators seized Signature Bank earlier this month after a run on the bank following the collapse of tech-friendly Silicon Valley Bank.

Former Rep. Barney Frank, an author of a major financial regulation law and a member of the bank’s board, criticized the state-level decision by arguing that regulators “wanted to send the message that crypto is toxic.”  

UPDATE: To reflect Liang’s remarks.

Additional reporting by Colin Wilhelm