The decision to curtail these transactions is reportedly taken due to a recent FDIC statement and the implosion of FTX, who they provided services for.
Crypto markets have been showing strong signs of recovery – but not everyone is convinced, and financial institutions are understandably on their guard.
According to the Federal Deposit Insurance Corporation (FDIC), offering crypto products and services should be considered a high-risk activity by traditional banks.
“Business models that are concentrated in crypto-asset-related activities or have concentrated exposures to the crypto-asset sector raise significant safety and soundness concerns. (We) will continue to closely monitor crypto-asset-related exposures of banking organizations. […] The agencies will issue additional statements related to engagement by banking organizations in crypto-asset-related activities.”
Binance Breaks The News
Some banks have apparently taken heed of the recent warning, with immediate consequences for customers. Yesterday, Binance addressed its userbase, informing them that one of its partners, Signature Bank, will cease handling fiat-to-crypto transactions worth less than $100k, according to Bloomberg.
The new policy will take effect on the 1st of February as the bank attempts to limit its exposure to cryptocurrencies. Signature Bank, an institution that offers financial services targeted at small businesses and executive-level private clients, suffered a 64% drop in share price last year.
Aiming to Downsize By Billions
Signature Bank also provided services to the elephant in the room, FTX. In order to address the contraction of the crypto industry caused by said elephant, Signature Bank reportedly wants to shed up to $10 billion in deposits belonging to businesses and investors heavily involved with cryptocurrency.
As a result, some Binance users may be temporarily unable to buy or exchange crypto with fiat. Naturally, this does not affect crypto-to-crypto exchanges or users’ ability to transfer their assets to another platform and cash out there.
Binance stressed that Signature Bank’s policy change will only affect about 0,01% of its user base and that the team is actively looking for a solution for those who would find themselves without a fiat option for withdrawal in a week’s time.
It’s unfortunate that some banks feel the need to distance themselves from crypto due to fears of yet another industry behemoth collapsing overnight. Nevertheless, this incident should also serve as a reminder to stable institutions that crypto is no longer seen as an instant gold rush opportunity by financial organizations – and as a result, constant dialogue with these entities is necessary in order to keep their decisions unaffected by FUD.