The FDIC instructed Signature buyers to halt all crypto transactions

According to reports, the Federal Deposit Insurance Corporation (FDIC) of the United States has instructed potential rescuers of some bank failures in the United States not to support any crypto services.

According to Reuters, the FDIC has instructed banks interested in acquiring failed U.S. lenders like Signature Bank and Silicon Valley Bank (SVB) to submit bids by March 17.

According to the report, which cites two people who are familiar with the situation, the authority will only accept bids from banks that already have a charter. This means that traditional lenders will be given preference over private equity firms. The FDIC wants to sell both SVB and Signature as whole businesses, but if that doesn’t happen, offers for parts of the banks could be considered.

The FDIC has also mandated that anyone purchasing Signature agree to cease all cryptocurrency transactions at the bank.

Signature, headquartered in New York, is a significant crypto-friendly bank in the United States. The bank has a lot of partnerships in the cryptocurrency industry. Among its clients are the Coinbase exchange, Paxos Trust, a stablecoin issuer, BitGo, a crypto custodian, and Celsius, a bankrupt cryptocurrency lender.

In a letter to the Federal Deposit Insurance Corporation (FDIC), U.S. Representative Tom Emmer expressed concern that the federal government is “weaponizing” issues pertaining to the banking industry to pursue crypto.

In the letter to FDIC chairman Martin Gruenberg, Emmer stated, “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.”

On March 12, the FDIC was appointed receiver and the New York State Department of Financial Services took over Signature. The FDIC transferred all of Signature Bank’s deposits and most of its assets to Signature Bridge Bank, a full-service bank that will be managed by the FDIC while it markets the institution to potential bidders. This was done to safeguard depositors.

Barney Frank, a former member of the United States House of Representatives, claims that Signature Bank was closed by New York regulators despite not being insolvent. Frank speculated that the action was a “very strong anti-crypto message” intended to exert influence over the cryptocurrency industry. However, the Federal Deposit Insurance Corporation (FDIC) stated in January that it did not prohibit or discourage banks from offering banking services to customers of “any specific class or type, as permitted by law or regulation.”

Later accounts suggested that Signature CEO Joseph DePaolo and CFO Stephen Wyremski had committed fraud by claiming the bank was “financially strong” three days before it was closed. Additionally, the bank is said to be under investigation for alleged money laundering.