On March 20, 2023, Flagstar Bank, a subsidiary of New York Community Bancorp, acquired the assets and bank branches of Signature Bank, which had collapsed a week earlier. The FDIC, which oversaw the acquisition, noted that Flagstar Bank would not assume any of Signature Bank’s cryptocurrency deposits or clients, which amounted to around $4 billion. Additionally, the FDIC estimated the cost of Signature Bank’s failure to its Deposit Insurance Fund at $2.5 billion. The agency’s press release also stated that it would directly provide deposits to customers associated with Signature Bank’s digital banking business.
The decision not to include Signature Bank’s cryptocurrency deposits in the acquisition by Flagstar Bank has sparked a discussion on social media, with some speculating that a conspiracy theory was proven true. Caitlin Long, founder and CEO of Custodia Bank, took to Twitter, saying, “They indeed kept out the crypto deposits. Investigation time.” Meanwhile, former politician Barney Frank suggested that Signature Bank’s closure was intended to convey an “anti-crypto” message.
Sources familiar with the sale had suggested that divesting Signature Bank’s cryptocurrency operations was required before the acquisition. However, the FDIC insisted last week that it wouldn’t be necessary. The New York State Department of Financial Services also publicly stated that Signature Bank’s shutdown was unrelated to cryptocurrency, further fueling speculation and skepticism surrounding the acquisition.
Despite the controversy, Flagstar Bank acquired nearly all of Signature Bank’s deposits and assets, and the branches will continue to operate during regular business hours. The FDIC’s decision to extend the bid window for Silicon Valley Bank (SVB) on Monday was another noteworthy development. Bids for SVB’s private bank are due on March 22, 2023, while bids for the bridge bank, Silicon Valley Bridge Bank, N.A., will be due two days later.
As the banking industry continues to navigate the evolving landscape of digital assets and cryptocurrency, events like the collapse of Signature Bank and the controversy surrounding its acquisition by Flagstar Bank are likely to continue. While the implications of these events on the broader financial regulatory environment and the future of digital assets remain unclear, one thing is certain: stakeholders across the industry will be closely monitoring these developments and their ripple effects.
