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U.S. FDIC tells Signature crypto clients to close accounts by April 5

96 points by VagueMag 4y ago

pstrateman 4y ago
[flagged]
- hanniabu 4y ago
  Operation Choke Point 2.0: The Federal Bank Regulators Come For Crypto https://www.cooperkirk.com/wp-content/uploads/2023/03/Operation-Choke-Point-2.0.pdf https://www.cooperkirk.com/wp-content/uploads/2023/03/Operat...
  - chatmasta 4y ago
    Federal Reserve announces July launch for the FedNow Service https://www.federalreserve.gov/newsevents/pressreleases/other20230315a.htm https://www.federalreserve.gov/newsevents/pressreleases/othe...
    - lxgr 4y ago
      Are you saying that the Fed should rather not modernize its payment services in order to offer a viable alternative to one of crypto's biggest purported advantages (being able to transact 24/7 with high finality/durability)?
      - chatmasta 4y ago
        I don't want to live in a cashless society, and I will resist CBDCs because of all the civil rights violations they enable and make easier. I have absolutely zero desire to transact with other individuals through some dystopian, government-facilitated digital payments system.
        lxgr 4y ago
        I‘d also prefer if cash stayed around (and ideally be augmented with privacy-preserving digital equivalents that strike a balance with valid state interests such as avoiding tax evasion). But keeping wire transfers and ACH expensive and/or painful seems like a terrible way of achieving that.
    - JumpCrisscross 4y ago
      Is the implication the Fed facilitated a banking panic to ease the roll-out of a system it set a timeline for in 2019?
      - chatmasta 4y ago
        Yes. Not a banking crisis, but a crypto crackdown. And the timeline of enforcement actions could have easily been planned since 2019 too.
        JumpCrisscross 4y ago
        > a crypto crackdown And in your mind it’s reasonable that someone tanked Silvergate and Signature to send this message? And their investors and lenders are just cool with that?
        chatmasta 4y ago
        What does the tanking of Signature have to do with the headline of the article, which is the FDIC arbitrarily telling "crypto clients" to close their accounts? This is the FDIC selectively targeting a specific group of depositors for no clear reason, other than - perhaps - that they pose a threat to the future hegemony of a government-backed digital currency, which just so happens to be launching (in its early form of a central government payments facility) four months from now.
        JumpCrisscross 4y ago
        > which is the FDIC arbitrarily telling "crypto clients" to close their accounts The FDIC isn't a bank. Signature was largely bought, but "Flagstar's bid did not include about $4 billion in deposits related to Signature's digital-asset business." The FDIC is telling depositors they couldn't find a buyer for to find a new bank. > they pose a threat to the future hegemony of a government-backed digital currency FedNow is not a CBDC. It's a modern set of payment rails for interbank transfers.
  - calgarymicro 4y ago
    This document discusses Barney Frank's claims that the NYDFS closed Signature because of crypto . . . without pointing out that Barney Frank was a director of Signature Bank. edit: Never mind, I can't read. That said, no one should listen to Frank about why he's not responsible for his bank blowing up.
    - humanizersequel 4y ago
      >Former Representative Barney Frank, a principal author of the Dodd-Frank legislation enacted in the wake of the 2008 financial crisis and a member of Signature’s Board of Directors...
- VagueMag 4y ago
  NYFDS didn't organize the Silicon Valley Bank run on Slack, or make them go too far out on a limb with duration risk in the first place. They also didn't cause Signature to suffer a run so severe they couldn't even say for sure what the size was of their deficit at the Fed: https://www.fdic.gov/news/speeches/2023/spmar2723.pdf https://www.fdic.gov/news/speeches/2023/spmar2723.pdf
  - hanniabu 4y ago
    [flagged]
    - eli 4y ago
      maybe don’t believe everything you read on twitter
      - mikeyouse 4y ago
        Just the laziest conspiracy theory too. Signature had nearly 90% uninsured deposits and 20% of their deposit base was from crypto or other "digital asset" companies. It was set up for a bank run. They lost 20% of their deposits in a matter of hours on the Friday of the SVB collapse which left them with a negative balance at the Fed. When the Fed and FDIC asked them how many withdrawals were queued up for Monday morning and how much money they needed to borrow from the Fed window to stay solvent, the bank couldn't tell them because their systems weren't capable of doing so. Absolute clown show.
        deleted 4y ago
        [deleted]
- altairprime 4y ago
  Would have been cheaper to just seize their assets under financial evasion and terrorism laws, apologize, and post them up to be claimed by anyone who shows up in person with the key. No need to collapse the system and spend $20b USD just to tempt people into making a taxable claim upon assets!
yieldcrv 4y ago
One interesting thing is that properly run crypto custodians don't make the news, are 100% collateralized and can withstand 100% withdrawals in an orderly fashion. Many people in the crypto space could attest to that from various crowdfunds that distributed everything fine, or exchanges that told people to withdraw, or wound down. In comparison, every bank in existence would have trouble with this. Its strange that the high profile mismanaged companies that happened to be dealing in crypto are influencing this kind of exclusion from Federal agencies now. But its also validating that these accounts that are moving will be handled with care, and whatever crypto service those deposits are supporting will most likely be able to function fine. Assuming these were predominantly US-based stablecoins. (Circle’s USDC used to bank there) Leveraged illiquid organizations with losses cannot withstand a collateral call. Whether that's a bank or a crypto exchange. Alternatives that remove or prohibit the leverage would be great.
- kasey_junk 4y ago
  You are comparing apples to oranges. Many banks offer custody services which are off balance sheet for them. That is they don’t count as assets or liabilities because there is no use of the custodial securities by the bank. The big difference is that you pay for the privilege of using a banks custody services. That’s why most people don’t use them for cash, it’s equivalent to putting cash in a safe deposit box, it depreciates even in deflationary times. Signatures crypto clients were not doing that. They were loaning money to the bank in order to achieve yield. No matter who it is you loan money to, you have counterparty risk, banks just happen to be one of the most regulated debtors in the world and depositors have unprecedented creditor rights. No crypto firms have that same level of security.
- chollida1 4y ago
  > One interesting thing is that properly run crypto custodians don't make the news, are 100% collateralized and can withstand 100% withdrawals in an orderly fashion. Many people in the crypto space could attest to that from various crowdfunds that distributed everything fine, or exchanges that told people to withdraw, or wound down. This is no different than any hedge funds prime brokerage, which is the more appropriate comparison. Both can lend out the securities that they hold but both should be able to call back and make their depositors whole. Crypto has nothing to do with this as far as I can tell.
deleted 4y ago
[deleted]
tintweezl 4y ago
If you look at the timeline vis-a-vis Silvergate Capital, this does look very suspicious, possibly a Chokepoint 2.0 Timeline: Nov 11: FTX/Alameda file BK. Nov 28: Sen Warren, retired Sen Marshall send letter to Silvergate requesting all records relating to FTX. BlockFi files BK. Dec 5: Deposits fall from $12B to $3.8B. Silvergate sells treasuries at $718M loss and take out FHLB loan for $4.3B to remain solvent and fully offramp depositors. Dec 31: Silvergate reports 4Q loss of $1B. Jan 5: Judge in FTX BK orders seizure of FTX assets at Silvergate. Feb 8: DOJ announces investigation into Silvergate role in FTX AML/KYC failures. Feb 14: Sen Warren-friendly Citadel reports 5.5% stake in Silvergate. In June Ken Griffin, CEO, announced he might like to be a crypto market maker. Mar 1: Silvergate announces delay in annual report, says may not be able to stay in business. Mar 2: Coinbase, Galaxy Digital drop Silvergate. Mar 7: Silvergate says forced to pay $4.3B FHLB loan early which was the final nail in its coffin. Mar 8: Silvergate announces liquidation although still solvent with assets exceeding liabilities of over $1B. Still, shares drop to $2 and a $48M market cap. Mar 10: FHLB issues press release specifically denying it forced early repayment but "no comment" on whether usually automatic roll-forwards granted routinely were specifically excluded for Silvergate despite oral assurances they would be granted. Mar 24: Silvergate stock doubles on rumors Citadel wants to acquire assets. Mar 31: Sen Warren seen smiling while reading article on crypto bank collapses. You be the judge...

96 points by VagueMag 4y ago

pstrateman 4y ago

[flagged]

hanniabu 4y ago
Operation Choke Point 2.0: The Federal Bank Regulators Come For Crypto https://www.cooperkirk.com/wp-content/uploads/2023/03/Operation-Choke-Point-2.0.pdf https://www.cooperkirk.com/wp-content/uploads/2023/03/Operat...
- chatmasta 4y ago
  Federal Reserve announces July launch for the FedNow Service https://www.federalreserve.gov/newsevents/pressreleases/other20230315a.htm https://www.federalreserve.gov/newsevents/pressreleases/othe...
  - lxgr 4y ago
    Are you saying that the Fed should rather not modernize its payment services in order to offer a viable alternative to one of crypto's biggest purported advantages (being able to transact 24/7 with high finality/durability)?
    - chatmasta 4y ago
      I don't want to live in a cashless society, and I will resist CBDCs because of all the civil rights violations they enable and make easier. I have absolutely zero desire to transact with other individuals through some dystopian, government-facilitated digital payments system.
      - lxgr 4y ago
        I‘d also prefer if cash stayed around (and ideally be augmented with privacy-preserving digital equivalents that strike a balance with valid state interests such as avoiding tax evasion). But keeping wire transfers and ACH expensive and/or painful seems like a terrible way of achieving that.
  - JumpCrisscross 4y ago
    Is the implication the Fed facilitated a banking panic to ease the roll-out of a system it set a timeline for in 2019?
    - chatmasta 4y ago
      Yes. Not a banking crisis, but a crypto crackdown. And the timeline of enforcement actions could have easily been planned since 2019 too.
      - JumpCrisscross 4y ago
        > a crypto crackdown And in your mind it’s reasonable that someone tanked Silvergate and Signature to send this message? And their investors and lenders are just cool with that?
        chatmasta 4y ago
        What does the tanking of Signature have to do with the headline of the article, which is the FDIC arbitrarily telling "crypto clients" to close their accounts? This is the FDIC selectively targeting a specific group of depositors for no clear reason, other than - perhaps - that they pose a threat to the future hegemony of a government-backed digital currency, which just so happens to be launching (in its early form of a central government payments facility) four months from now.
        JumpCrisscross 4y ago
        > which is the FDIC arbitrarily telling "crypto clients" to close their accounts The FDIC isn't a bank. Signature was largely bought, but "Flagstar's bid did not include about $4 billion in deposits related to Signature's digital-asset business." The FDIC is telling depositors they couldn't find a buyer for to find a new bank. > they pose a threat to the future hegemony of a government-backed digital currency FedNow is not a CBDC. It's a modern set of payment rails for interbank transfers.
- calgarymicro 4y ago
  This document discusses Barney Frank's claims that the NYDFS closed Signature because of crypto . . . without pointing out that Barney Frank was a director of Signature Bank. edit: Never mind, I can't read. That said, no one should listen to Frank about why he's not responsible for his bank blowing up.
  - humanizersequel 4y ago
    >Former Representative Barney Frank, a principal author of the Dodd-Frank legislation enacted in the wake of the 2008 financial crisis and a member of Signature’s Board of Directors...
VagueMag 4y ago
NYFDS didn't organize the Silicon Valley Bank run on Slack, or make them go too far out on a limb with duration risk in the first place. They also didn't cause Signature to suffer a run so severe they couldn't even say for sure what the size was of their deficit at the Fed: https://www.fdic.gov/news/speeches/2023/spmar2723.pdf https://www.fdic.gov/news/speeches/2023/spmar2723.pdf
- hanniabu 4y ago
  [flagged]
  - eli 4y ago
    maybe don’t believe everything you read on twitter
    - mikeyouse 4y ago
      Just the laziest conspiracy theory too. Signature had nearly 90% uninsured deposits and 20% of their deposit base was from crypto or other "digital asset" companies. It was set up for a bank run. They lost 20% of their deposits in a matter of hours on the Friday of the SVB collapse which left them with a negative balance at the Fed. When the Fed and FDIC asked them how many withdrawals were queued up for Monday morning and how much money they needed to borrow from the Fed window to stay solvent, the bank couldn't tell them because their systems weren't capable of doing so. Absolute clown show.
      - deleted 4y ago
        [deleted]
altairprime 4y ago
Would have been cheaper to just seize their assets under financial evasion and terrorism laws, apologize, and post them up to be claimed by anyone who shows up in person with the key. No need to collapse the system and spend $20b USD just to tempt people into making a taxable claim upon assets!

yieldcrv 4y ago

One interesting thing is that properly run crypto custodians don't make the news, are 100% collateralized and can withstand 100% withdrawals in an orderly fashion. Many people in the crypto space could attest to that from various crowdfunds that distributed everything fine, or exchanges that told people to withdraw, or wound down. In comparison, every bank in existence would have trouble with this. Its strange that the high profile mismanaged companies that happened to be dealing in crypto are influencing this kind of exclusion from Federal agencies now. But its also validating that these accounts that are moving will be handled with care, and whatever crypto service those deposits are supporting will most likely be able to function fine. Assuming these were predominantly US-based stablecoins. (Circle’s USDC used to bank there) Leveraged illiquid organizations with losses cannot withstand a collateral call. Whether that's a bank or a crypto exchange. Alternatives that remove or prohibit the leverage would be great.

kasey_junk 4y ago
You are comparing apples to oranges. Many banks offer custody services which are off balance sheet for them. That is they don’t count as assets or liabilities because there is no use of the custodial securities by the bank. The big difference is that you pay for the privilege of using a banks custody services. That’s why most people don’t use them for cash, it’s equivalent to putting cash in a safe deposit box, it depreciates even in deflationary times. Signatures crypto clients were not doing that. They were loaning money to the bank in order to achieve yield. No matter who it is you loan money to, you have counterparty risk, banks just happen to be one of the most regulated debtors in the world and depositors have unprecedented creditor rights. No crypto firms have that same level of security.
chollida1 4y ago
> One interesting thing is that properly run crypto custodians don't make the news, are 100% collateralized and can withstand 100% withdrawals in an orderly fashion. Many people in the crypto space could attest to that from various crowdfunds that distributed everything fine, or exchanges that told people to withdraw, or wound down. This is no different than any hedge funds prime brokerage, which is the more appropriate comparison. Both can lend out the securities that they hold but both should be able to call back and make their depositors whole. Crypto has nothing to do with this as far as I can tell.

deleted 4y ago

[deleted]

tintweezl 4y ago

If you look at the timeline vis-a-vis Silvergate Capital, this does look very suspicious, possibly a Chokepoint 2.0 Timeline: Nov 11: FTX/Alameda file BK. Nov 28: Sen Warren, retired Sen Marshall send letter to Silvergate requesting all records relating to FTX. BlockFi files BK. Dec 5: Deposits fall from $12B to $3.8B. Silvergate sells treasuries at $718M loss and take out FHLB loan for $4.3B to remain solvent and fully offramp depositors. Dec 31: Silvergate reports 4Q loss of $1B. Jan 5: Judge in FTX BK orders seizure of FTX assets at Silvergate. Feb 8: DOJ announces investigation into Silvergate role in FTX AML/KYC failures. Feb 14: Sen Warren-friendly Citadel reports 5.5% stake in Silvergate. In June Ken Griffin, CEO, announced he might like to be a crypto market maker. Mar 1: Silvergate announces delay in annual report, says may not be able to stay in business. Mar 2: Coinbase, Galaxy Digital drop Silvergate. Mar 7: Silvergate says forced to pay $4.3B FHLB loan early which was the final nail in its coffin. Mar 8: Silvergate announces liquidation although still solvent with assets exceeding liabilities of over $1B. Still, shares drop to $2 and a $48M market cap. Mar 10: FHLB issues press release specifically denying it forced early repayment but "no comment" on whether usually automatic roll-forwards granted routinely were specifically excluded for Silvergate despite oral assurances they would be granted. Mar 24: Silvergate stock doubles on rumors Citadel wants to acquire assets. Mar 31: Sen Warren seen smiling while reading article on crypto bank collapses. You be the judge...