Bessie Liu

A subsidiary of the New York Community Bankcorp, Inc. has entered an agreement to purchase Signature Bank, the Federal Deposit Insurance Corporation (FDIC) said in a press release on Sunday.



The latest deal includes all $38.4 billion in Signature’s assets and $12.9 billion in loans, which were purchased at a significant discount of $2.7 billion.&nbsp;



What’s not included in the acquisition is approximately $60 billion in loans — which will remain under the receivership of the FDIC until later distribution — and $4 billion in deposits from Signature’s cryptocurrency business.&nbsp;



All <a href="https://blockworks.co/tag/signature" target="_blank" rel="noreferrer noopener">Signature</a> customers with cryptocurrency-related deposits with Signature bank will receive their funds directly from the <a href="https://blockworks.co/tag/fdic" target="_blank" rel="noreferrer noopener">FDIC</a>. 



The 40 branches of Signature Bank will operate during normal business hours under the subsidiary Flagstar Bank, starting today.



Signature Bank was the third bank to close its doors this month, <a href="https://blockworks.co/news/banking-sector-versus-defi">following the collapse of Silicon Valley Bank and Silvergate Bank</a>.&nbsp;



Unlike the other two banks, however, Signature bank <a href="https://blockworks.co/news/crypto-regulation-policy-law">was shut down by New York state regulators</a>, ostensibly, to protect the US banking system, although not due to insolvency.



Its closure has drawn concern across the broader cryptocurrency industry, as it was one of the few traditional financial institutions that recognized cryptoassets.&nbsp;



A CoinGecko <a href="https://www.coingecko.com/research/publications/svb-signature-bank-crypto-exposure" target="_blank" rel="noreferrer noopener">report</a> shows that the crypto company which has had the most exposure to the bank failures is <a href="https://blockworks.co/tag/circle" target="_blank" rel="noreferrer noopener">Circle</a> — the issuer of the <a href="https://blockworks.co/tag/usdc" target="_blank" rel="noreferrer noopener">USDC</a> stablecoin.



Circle announced last week that it was accelerating the onboarding of a <a href="https://blockworks.co/news/new-circle-bank-after-usdc-depeg">new banking partner</a>, Cross River Bank.



Paxos, Coinbase, BlockFi also have material exposure to the shuttered bank. Paxos reported $250 million held at Signature, while Coinbase had $240 million with Signature Bank, and BlockFi noted $227 million in assets were affected.



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New York Community Bank Will Acquire Signature — But Not Crypto Holdings

Linda Jeng

Before I began working in the crypto sector, I was a banking regulator. I am struck by this string of bank crises and how some believe crypto is to blame. The evidence, by contrast, points to a more fundamental culpability besides crypto.



Ultimately, much of what we are seeing with these crises is an artifact of a structural change in the system. At some level, uninsured deposits will always bear a run risk; and as uninsured deposits increase across the system, the system in turn will face a greater run risk. Add a rising interest rate environment to this, and you pour gasoline on the fire.&nbsp;



And looking towards Silicon Valley, or, more narrowly, crypto, as the root of the problem is looking in the wrong place.



The narrative conflating SVB with crypto woes is dangerously misleading. Unlike Silvergate, SVB was not a crypto-focused bank, it was a technology and healthcare-focused bank. Why is SVB failing on the heels of Silvergate’s wind down? Did Silvergate’s collapse cause SVB’s failure? Or was it simply correlation, though perhaps with some shared underlying causes?



<h2>Concentration risk brought down crypto-friendly banks Silvergate and Signature</h2>



At the first crypto startup where I worked, we struggled to find banking partners even though we were funded by well-known VCs (and indeed, by the co-founder of Microsoft). At that time, which was four years ago, there were only three or four crypto-friendly banks out of the over 4,000 banks in the US — and SVB was not one of them.&nbsp;



Instead of distributing exposure risk to the crypto sector across the US banking system, the risk was concentrated in these few banks because other banks were not willing to bank crypto companies. This concentration risk was not unknown. I wrote about it in my research paper back in 2021. Due to the lack of regulatory certainty and passive supervisory encouragement to de-risk (aka, to not bank crypto), most banks did not want to incur the additional scrutiny. Fast forward to last year, and we still see the same environment of regulatory uncertainty along with the same three or four crypto-friendly banks. This huge concentration risk was not created by industry; regulators had a heavy hand.



Fast forward again to today, none of these crypto-friendly banks are available anymore to bank crypto. Two of these crypto-friendly banks have failed, and the other one or two banks have de-risked. While we have seen deposits from crypto now going toward large and regional US banks, it’s not clear if this will be short-term support or long-term commitment. And if crypto firm deposits go offshore or to shadow banking, this will pose a worrying vision for the digital future of the US.



<h2>Deposits shot up across the banking system</h2>



Bank deposits shot up across the entire US banking system during the pandemic —&nbsp;not just banks heavily engaged with crypto companies



According to a Fed research paper published last year, deposits at US domestic commercial banks expanded dramatically when the Covid-19 pandemic began. Total deposits rose by more than 35 percent between the end of 2019 and the fourth quarter of 2021 to around $18 trillion.&nbsp;



It had been a considerable time since the US witnessed such a dramatic increase in deposits. Intuition might suggest that greater savings, i.e. the consumer acting prudentially in a crisis, is maybe a good thing. As with most things, the answer is: It depends.



The FDIC was created by FDR in 1933 to address the most severe banking crisis in US history by insuring bank deposits. I was working on the Hill when Congress raised the FDIC coverage from $100,000 to $250,000 per depositor and per insured bank, during the 2008 global financial crisis. It helped to stem the tide of bank runs by retail depositors, but even then I wondered how it would possibly mitigate the risk of bank runs by corporate depositors.&nbsp;



Companies must meet payroll, receive payments and make payments. Businesses generally keep a cash buffer of three to six months’ worth of operating expenses, which can easily exceed $250,000 — even for startup companies. These large corporate deposit accounts can go down quickly. Bank runs are no longer caused just by retail depositors, but by regular companies, VCs and startups. Silicon Valley Bank (SVB) experienced a $42 billion bank run in less than 24 hours.



According to Business Insider, its survey of 15 US banks found over $1 trillion of uninsured deposits. Signature Bank had 90% uninsured deposits, SVB had 88%, and even Citigroup, a global systemically-important bank, has 85%.



These numbers reveal a general and increasing financial stability risk in the US financial system. Yet in its most recent Financial Stability Report from 2022, the Fed did not call out this structural vulnerability.&nbsp;&nbsp;



I’m also seeing a narrative in the media that if SVB had been subject to full capital and liquidity rules, there would not have been a bank run. Whether SVB should have been subject to these rules is a separate question, but it’s unclear to me whether any bank — no matter how well capitalized and well-managed — can withstand a $42 billion outflow in a single day.



In the end, bank deposits are simply contract claims the depositor has with the bank. The Fed, along with the Treasury and the FDIC, took the unprecedented step of insuring ALL deposits at SVB and Signature Bank. Many of us in both the tech and crypto sector breathed a sigh of relief and gratitude for the government’s action, but we will not know how this unusual move will impact moral hazard in the financial system in the long run. Former FDIC head Sheila Bair recently commented that the uninsured depositors, the companies and high net worth individuals should be the ones exerting market discipline by more closely examining their banks of choice. But how can they do that when material information about the bank, including supervisory exam findings, is confidential?&nbsp;&nbsp;



<h2>Poor management of interest rate risk tanked SVB</h2>



Banks generally fail due to credit risk from borrowing short and lending long. But SVB failed due to interest rate risk, which is a more unusual phenomenon. Supervisory bank exams by regulators cover several risk “stripes,” including interest rate risk (IRR). As described above, SVB (like other banks in a low interest rate environment) purchased longer-dated Treasury securities in search of higher net interest margins (NIMs). What SVB did not foresee was the accelerated rate with which its tech company customers would begin to use up their store of deposits that they had raised during fatter years.



SVB simply forgot the fundamentals of IRR management. For almost a decade — from 2008 to 2017 — the US experienced not only low interest rates, but near-zero interest rates. SVB is definitely not the only bank to have grown used to the low interest rate environment. Banks across the US financial system are sitting on $620 billion in unrealized losses (assets that have decreased in price but have not been sold).



But even if SVB and other US banks may have forgotten how to manage IRR, the Fed and state supervisors (note: SVB’s main regulators were the San Francisco Fed and California’s DFPI) should not have forgotten. IRR supervisory reviews should have flagged this weakness in the safety and soundness of SVB, especially because disclosures show that risk clearly became a skyrocketing concern for the SVB board.



US policymakers and industry should leverage lessons learned to address the structural vulnerabilities that have cracked through. The unprecedented move to protect all deposits at SVB and Signature will have consequences on the US banking industry to be discussed another day, and it’s certainly time for a refresher of fundamentals in bank risk management for both the US banking industry and regulators.



But most importantly, regulators should encourage US banks to bank all sectors in order to reduce exposure risk —&nbsp;from crypto to tech to housing and beyond.



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<div class="is-layout-flex wp-container-2 wp-block-columns">
<div class="is-layout-flow wp-block-column" style="flex-basis:100%"><div class="wp-block-post-author-biography">Linda Jeng worked at the Fed where she chaired the Basel Committee’s working group on open banking. She has spent most of her career working on financial stability and reg reform, including the Financial Stability Board in Basel working on international standards addressing Too-Big-to-Fail, the U.S. Senate drafting the Dodd-Frank Act, and the U.S. Treasury Department on the international implementation of G20-led reforms.</div></div>
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Don’t Blame Crypto for Your Banking Problems

Ben Strack

The Federal Deposit Insurance Corporation (FDIC) said it seeks to sell Signature Bank’s entire business, contradicting a report that buyers would have to agree to give up the company’s crypto dealings.



The report came Thursday from Reuters, which cited people familiar with the matter. Bids for <a href="https://blockworks.co/tag/signature" target="_blank" rel="noreferrer noopener">Signature</a>, as well as Silicon Valley Bank (SVB), are said to be due Friday.&nbsp;



But the FDIC would not require the divestment of crypto activities as part of any sale of the banks, a spokesperson told Blockworks.&nbsp;



The FDIC’s stance is consistent with previous <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230103a1.pdf" target="_blank" rel="noreferrer noopener">guidance</a> from the corporation — along with the Federal Reserve’s board of governors and the Office of the Comptroller of the Currency (OCC) —&nbsp; about the risks of cryptoassets.&nbsp;&nbsp;&nbsp;&nbsp;



“Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation,” the regulators said in a January joint statement.



Potential acquirers of Signature will tell the <a href="https://blockworks.co/tag/fdic" target="_blank" rel="noreferrer noopener">FDIC</a> what assets and liabilities they’re willing to take from the bank, the FDIC representative added.



“So clearly, those who are interested in the bidding process will create their own conditions for purchase,” the spokesperson said.



Samuel Dibble, a partner at law firm Baker Botts, said some buyers might want to include a clause that excludes buying the crypto business for a couple reasons.&nbsp;&nbsp;



“They [may] have made a conscious decision not to acquire or hold any digital assets, or they don’t know how to value digital assets and therefore want to submit a bid that avoids having to value them,” he said.



<h2>Interest to buy?</h2>



An executive at a mergers and acquisitions (M&amp;A) advisory firm, who agreed to speak under the condition of anonymity, said Signature’s crypto-related business, including its digital payments platform, <a href="https://www.signatureny.com/business/signet" target="_blank" rel="noreferrer noopener">Signet</a>, is crucially important to the sector and will be “very valuable” to the right acquirer.



“I suspect that the crypto portion of the business will find a buyer,” they said. “We see this as a crucial test for the industry.”



Though <a href="https://blockworks.co/news/no-more-sen-now-what">Silvergate shut down its exchange network, SEN</a>, earlier this month, Signet remains operational. Signet, powered by technology from Tassat Group, allows commercial clients of the bank to transfer funds between one another in real-time.



“Signet … has operated smoothly and without interruption during this period to help facilitate needed intra-bank payments for Signature&#8217;s clients,” Tassat CEO Kevin Greene said in a statement. “The current events extend beyond Signature, and affect every bank in the country.”



But Donald Putnam, a managing director with M&amp;A specialist Grail Partners, said he expects banks that have acted as rails for fintech payment systems, such as Signature and SVB, will find few ready buyers.



“Those businesses are under regulatory scrutiny and low margin,” he added. “A few banks — Cross River comes to mind — have made a big profitable business supporting fintech, but they are the exception. The larger banks are still experiencing losses on every transaction when all costs are accounted for.”



Dibble said the benefit of buying Signature’s assets would be to acquire its relationships that it has with depositors and borrowers. But he noted, the market is a bit “spooked” right now.



“I don’t really see the ‘too big to fail’ banks rushing into a crypto business at this stage and I also don’t see any other mid-size or regional banks…looking to double down by acquiring all of Signature’s assets&nbsp; — or even just its crypto assets,” he said.



<h2>Advocacy groups speaking up</h2>



The <a href="https://blockworks.co/news/who-will-bank-crypto">crypto banking landscape is clearly in flux</a> after the collapse of Silvergate, Signature and Silicon Valley Bank.&nbsp;



The original report which stated whoever acquires Signature would have to give up the company’s crypto dealings sparked the ire of certain advocacy groups in the sector.&nbsp;&nbsp;



“As long as a crypto company can demonstrate its ability to be a good bank customer, it should be able to be banked and not be subject to a black-and-white blanket ban,” Sheila Warren, CEO of the Crypto Council for Innovation, said in a statement.&nbsp;



The Blockchain Association said Thursday it sent Freedom of Information Act (FOIA) requests to the FDIC, OCC and the Federal Reserve’s board of governors to investigate the potential de-banking of lawful crypto business, in what some have theorized could be part of a second “<a href="https://blockworks.co/news/operation-choke-point-2-0">Operation Choke Point</a>.”



The advocacy group added that allegations include account closures and the refusal to open new accounts, which it said is “more concerning in the wake of this week’s banking crisis.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ These reports are especially concerning this month after the failures of Silvergate, Silicon Valley Bank, and Signature Bank. Those banks had many crypto companies as customers, who are now rushing to open new accounts elsewhere to make payroll and stay in business.&mdash; Jake Chervinsky (@jchervinsky) <a href="https://twitter.com/jchervinsky/status/1636356461914726402?ref_src=twsrc%5Etfw">March 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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A Blockchain Association spokesperson did not comment on which banks are allegedly de-banking crypto firms. The group has established a tip line seeking to collect more information.&nbsp;



Jake Chervinsky, the Blockchain Association’s chief policy officer, argued via Twitter that there is no valid reason to de-bank crypto companies.&nbsp;



“They&#8217;re just like all other law-abiding companies that need bank accounts to operate: they hold dollars to pay rent, salaries and taxes,” he wrote. “If regulators are debanking crypto companies, they&#8217;re breaking the law.”



Updated March 16, 2023 at 3:42 pm ET: Added comments from Samuel Dibble, a partner at law firm Baker Botts.



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FDIC Seeks To Sell Signature Bank — Crypto Business and All

Casey Wagner

US financial regulators joined forces again this week to make sure banks got the message: They need to take risks associated with crypto seriously.



But so far, no new requirements have been issued.&nbsp;



Firms have been put on notice that careful risk assessments need to happen, but the latest statement is in no way creating new policies, the Federal Reserve, Federal Deposit Insurance Company (FDIC) and the Office of the Comptroller of the Currency (OCC) said.&nbsp;



The new statement, issued Thursday, is intended to “remind banking organizations to apply existing risk management principles” when it comes to crypto-related activities.



Banks should consider “concentration and interconnectedness” across deposits and potential liquidity risks. Firms are also advised to complete “robust due diligence and ongoing monitoring” of all crypto activity.



Thursday’s statement is an update to the warning issued <a href="https://blockworks.co/news/crypto-poses-key-risks-to-banks-but-carry-on">by the same three groups in January</a>. The agencies are primarily concerned with volatility and liquidity risks on exchanges and with stablecoin reserves, the new <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230223a1.pdf" target="_blank" rel="noreferrer noopener">statement</a> added, and banks need to take the proper precautions. 



Regulators said banks should not lend deposits made by crypto customers and should hold cash to back all deposits.



“One read of the follow-up is that it’s positive insofar that the regulators specifically clarify they aren’t banning banks from banking crypto,” Galaxy Digital analysts wrote in a note Friday. “This could be seen as slightly softening their prior guidance and genuinely providing a bit more clarity.”



On the other hand, the statement could simply be preemptive of future policy, analysts added. It’s no secret <a href="https://blockworks.co/news/senate-banking-hearing-on-crypto-crash">Congress</a> and the <a href="https://blockworks.co/news/sec-crypto-enforcement-actions-accelerate">SEC</a> are taking a harsher look at the industry, and it’s only a matter of time before banks have new guidelines.



<h2>Scrutiny of crypto access to the banking system heats up&nbsp;</h2>



In a <a href="https://blockworks.co/news/senate-banking-hearing-on-crypto-crash">Senate hearing earlier this month</a> to discuss recent turmoil in markets, witness Lee Reiners, policy director of the Duke Financial Economics Center, urged lawmakers to isolate digital assets from financial institutions.&nbsp;



“We should do everything we can to restrict crypto from entering the banking system,” Reiners said in his testimony.&nbsp;&nbsp;



Banks are starting to take the hint, too. Notoriously crypto-friendly Signature Bank dropped <a href="https://blockworks.co/news/signature-bank-limit-on-swift-transactions-with-binance-affects-few-users">long-term client Binance</a> last month and Custodia’s second bid for Fed supervision was unanimously <a href="https://www.federalreserve.gov/newsevents/pressreleases/orders20230223a.htm" target="_blank" rel="noreferrer noopener">denied</a> Thursday. 



Custodia is now suing the Fed Board and its Kansas City branch over the dispute.&nbsp;



“What matters is whether banks are actually being pressured or not, and there is some evidence they are,” Galaxy analysts said.&nbsp;



“Further, it matters whether the sum of the actions the banking regulators have taken has had an impact on bank’s risk tolerance frameworks, i.e., whether both banks that do and banks that do not provide services to the sector have sufficient clarity or are not otherwise dissuaded from providing services to the crypto sector.”



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Banks Should Back Deposits From Crypto Customers With Cash: US Agencies

<div id="highlights-block_62ffd9684598e" class="highlights">
 <ul>
 <li>Harrison tweeted on July 20 that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names”</li>
 <li>FTX is also falsely identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the agency</li>
 </ul>
 
</div>



The Federal Deposit Insurance Corporation (FDIC) has warned five companies, including crypto exchange FTX US, to stop making false and misleading statements about FDIC deposit insurance, the agency <a href="https://www.fdic.gov/news/press-releases/2022/pr22060.html" target="_blank" rel="noreferrer noopener">revealed Friday</a>.



<a href="https://www.fdic.gov/news/press-releases/2022/ftx-harrison-letter.pdf" target="_blank" rel="noreferrer noopener">In a letter sent to FTX US</a> on Thursday, the FDIC wrote that the firm’s president, Brett Harrison, said in a July 20 tweet that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” The tweet also states that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”



“FTX US is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency,” the FDIC said in the letter.&nbsp;



It continued: “The FDIC only insures deposits held in insured banks and savings associations…and FDIC insurance only protects against losses caused by the failure of insured institutions. Accordingly, these statements are likely to mislead, and potentially harm consumers.”



FTX is further identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the FDIC.&nbsp;



Harrison <a href="https://twitter.com/Brett_FTX/status/1560701320717369349" target="_blank" rel="noreferrer noopener">tweeted in response</a> to the letter Friday, saying that he deleted the July 20 tweet, which he noted was written in response to questions regarding whether direct USD deposits from employers were held at insured banks.    



“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison added. “I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.”



In addition to sending cease-and-desist letters to FTX US, CryptoSec.info and SmartAsset.com, the FDIC also issued notices to Cryptonews.com and FDICCrypto.com for similar alleged violations.&nbsp;



This is a developing story.



Updated on Aug. 19, 2022 at 3:01 pm ET.



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FDIC Accuses FTX US of Making Misleading Statements

Shalini Nagarajan

<div id="highlights-block_62c7fcae929e9" class="highlights">
 <ul>
 <li>Customers are figuring out their Voyager deposits aren’t directly insured by the FDIC</li>
 <li>The crypto lender said customers would be able to access funds “after a reconciliation and fraud prevention process” is completed</li>
 </ul>
 
</div>



Voyager, the cryptocurrency lender that <a href="https://cms.blockworks.co/voyager-files-for-bankruptcy-days-after-freezing-withdrawals/" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> this week, is under the spotlight for the way it marketed its deposit accounts to users.&nbsp;



The crypto lender had publicly said dollar deposits are insured by the Federal Deposit Insurance Corporation, owing to a partnership with Metropolitan Commercial Bank.&nbsp;



The <a href="https://www.wsj.com/articles/fdic-scrutinizing-voyagers-marketing-on-safety-of-customer-deposit-accounts-11657212266?mod=markets_lead_pos6" target="_blank" rel="noreferrer noopener">Wall Street Journal</a> reported on Thursday that a December 2019 <a href="https://web.archive.org/web/20210218190959/https://www.investvoyager.com/blog/voyager-is-now-fdic-insured/" target="_blank" rel="noreferrer noopener">statement</a> on Voyager’s website claims customers would receive full reimbursement in “the rare event your USD funds are compromised due to the company or our banking partner&#8217;s failure.”&nbsp;



But the same statement has now been <a href="https://www.investvoyager.com/blog/voyager-is-now-fdic-insured/" target="_blank" rel="noreferrer noopener">altered</a> to remove references to the banking partner or itself, now simply saying in the “rare event your USD funds are compromised, you are guaranteed a full reimbursement (up to $250,000).”



What is notable is that Voyager’s rule applies only to customers’ dollar deposits — not cryptoassets. The lender’s customers have <a href="https://twitter.com/MattJacksonUSF/status/1544645272269209605" target="_blank" rel="noreferrer noopener">expressed frustration</a> at not being able to access their funds, and are especially concerned after it revealed significant exposure to embattled crypto hedge fund Three Arrows Capital.



Voyager is among some firms that have taken a hit from plunging cryptocurrency prices and a liquidity crisis in the market. After <a href="https://cms.blockworks.co/voyager-seeks-strategic-alternatives-following-pause-to-withdrawals/" target="_blank" rel="noreferrer noopener">freezing withdrawals</a> and trading on its platform, the firm filed for bankruptcy and said customers would receive their funds upon reorganization. It has said it holds more than $350 million in cash at the Metropolitan Commercial Bank.&nbsp;



In its <a href="https://www.investvoyager.com/pressreleases/voyager-digital-commences-financial-restructuring-process-to-maximize-value-for-all-stakeholders" target="_blank" rel="noreferrer noopener">statement</a> on July 6, Voyager said customers with dollar deposits would receive access to their funds after a “reconciliation and fraud prevention process” is completed with Metropolitan Commercial Bank. But it didn’t lay out how long that would take.



Some customers have only just worked out that their deposits are not insured in the way they initially thought, according to The Journal. It appears Voyager guaranteed a safety net — when there actually isn’t one — by stealthily packaging how its deposits are insured.



The firm’s individual customer accounts are eligible for insurance, but only in the event of failure by Metropolitan Commercial Bank. The New York-based bank <a href="https://www.mcbankny.com/fdic-coverage-available-to-voyager-customers/" target="_blank" rel="noreferrer noopener">clarified</a> that this week, saying FDIC insurance would only be available if the bank itself failed and not in case of Voyager’s failure. It added that it maintains an account for Voyager customers holding only US dollars, not cryptoassets.&nbsp;



A <a href="https://www.investvoyager.com/useragreement/" target="_blank" rel="noreferrer noopener">user agreement</a>, which can often easily be overlooked by users, on Voyager’s website shows that the FDIC protection applies only if the partner bank fails.



That mix-up about the protection of funds placed in Voyager through Metropolitan Commercial Bank has drawn the FDIC’s attention, and the agency is now looking into the lender’s marketing material, a spokesperson for the agency told Blockworks.



&#8220;Voyager Digital is not&nbsp;an FDIC-insured bank or savings association,&#8221; they added. &#8220;This means that the FDIC’s deposit insurance does not protect Voyager Digital’s customers against Voyager Digital’s default, bankruptcy, suspension of withdrawals, or against loss in value of products.&#8221;



Less than two months ago, the FDIC announced a <a href="https://www.fdic.gov/news/press-releases/2022/pr22041.html" target="_blank" rel="noreferrer noopener">rule</a> prohibiting any person or entity from falsely using the agency’s deposit insurance, as this could undermine confidence in legitimately insured banks. The Consumer Financial Protection Bureau <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-to-protect-depositors-from-false-claims-about-fdic-insurance/#:~:text=Misrepresenting%20the%20FDIC%20logo%20or,insurance%20will%20typically%20be%20material." target="_blank" rel="noreferrer noopener">addressed</a> the issue on the same day, highlighting the risks posed to consumers of emergent financial assets like cryptocurrencies.&nbsp;



Daniel Besikof, a partner at law firm Loeb &amp; Loeb in New York, said Voyager’s bankruptcy filing is a negative development for its account holders, some of whom held millions of dollars of cryptoassets in their accounts.&nbsp;



“Voyager Digital is treating those account holders essentially as unsecured creditors and proposing to satisfy their claims with a package of coins, equity in the reorganized Voyager and other assets,” he added. “The value of that package is unknown.”&nbsp;



Voyager didn’t immediately return Blockworks’ request for comment.



This story has been edited to include the FDIC&#8217;s response.



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Crypto Lender Voyager’s Marketing Materials Under FDIC Scanner

In the weekly roundup episode of Blockworks&#8217; podcast &#8220;<a href="https://youtu.be/h4Go_Tw_vPk" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Mike and Mark spend a lot of time on Bitcoin&#8217;s recent run above $55,000. They take a look at open interest and the rolling 1 month basis on Bitcoin futures on CME compared to other offshore exchanges like Deribit and Huobi, and what that says about institutional flows. They also take a look at Bitcoin&#8217;s price action compared to previous cycles in 2013 and 2017, and the recent resumption of the seasonality trend and divergence from equities. 



Later in their talk, they dive deep into food prices, rising energy prices and depleted coal reserves in China and India, and what that says about the current state of geopolitics. 



They also cover:



<ul><li>Bitcoin&#8217;s price action compared to previous 2013 and 2017 cycles</li><li>Recent resumption of the seasonality trend and divergence from equities</li><li>George Soros&#8217; family office and crypto</li><li>The FDIC reportedly taking a look at stablecoin deposits</li></ul>



Watch the full episode below! 👇



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<iframe loading="lazy" title="Institutional Money Drives Bitcoin Higher, China Grapples with Energy Crisis | Round Up" width="1024" height="576" src="https://www.youtube.com/embed/h4Go_Tw_vPk?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week he is joined by co-host Mark Yusko where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



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Podcast: Institutional Money Drives Bitcoin Higher, China Grapples with Energy Crisis

Jacquelyn Melinek

<div id="highlights-block_6151d86e159fb" class="highlights">
 <ul>
 <li>The direct deposit launch was driven by customer feedback that “making frequent transfers is time-consuming and inconvenient,” Coinbase said</li>
 <li>The company also announced its debit card ‘Coinbase Card’ will be rolling out general availability for US customers starting this Fall</li>
 </ul>
 
</div>



Coinbase users will soon be able to directly deposit any percentage of their paycheck into their accounts on its crypto-exchange platform, <a href="https://cms.blockworks.co/coinbase-ceo-50-of-the-people-he-spoke-to-in-dc-think-crypto-is-a-risk/" target="_blank" rel="noreferrer noopener">the company said</a> on Monday.&nbsp;



“We are rolling out direct deposit to the first customers over the next few weeks. We are starting with customers in the US and plan to roll it out to more countries in the future,” Coinbase Senior Director of Product and Head of Payments &amp; Financial Hub Prakash Hariramani said in an email to Blockworks.



The US-based company has over 100 digital assets listed on its exchange and about 68 million verified users across over 100 countries, which is up 58% from 43 million users at the end of 2020.&nbsp;



Users can get paid in any of the cryptocurrencies available on the crypto exchange or opt for US dollars on the platform, the company said. The company has also partnered with a number of companies, including M31 Capital, Nansen, and SuperRare Labs to help businesses pay employees in crypto.&nbsp;



“Choose to get paid in crypto so you can make recurring buys or earn interest on your income (by getting paid in USDC, DAI, or other interest-yielding assets), or choose to get paid in US dollars,” the company said in a statement.&nbsp;



Prior to the direct deposit announcement, in order to buy, sell or trade cryptocurrencies on Coinbase, users had to transfer their funds from personal bank accounts, another crypto-exchange, or personal wallets.&nbsp;



<blockquote class="wp-block-quote">“We heard regularly from our customers that making frequent transfers has been time-consuming and inconvenient for them,” Hariramani said. “Our goal with direct deposit is to make it easier for our customers to make regular crypto investments by automating the process,” Hariramani added.&nbsp;</blockquote>



Users can manually set up the new direct deposit service or have Coinbase automatically update paycheck allocations through the application. There are no transaction fees on the conversion of direct deposit funds from USD to cryptocurrency, the company said. However, it noted that a spread applies when users buy, sell or trade cryptocurrencies.



<h3>Other ways to spend</h3>



The company recently launched its <a href="https://www.coinbase.com/card" target="_blank" rel="noreferrer noopener">Coinbase Card</a>, a Visa debit card that gives up to 4% back in crypto rewards on eligible purchases. In June, some people were invited off the waitlist, but the card will begin rolling out general availability this Fall for all US-based customers, excluding Hawaii residents, a spokesperson told Blockworks. 



Earlier this year, other cryptocurrency companies like <a href="https://cms.blockworks.co/gemini-mastercard-to-launch-crypto-rewards-card/" target="_blank" rel="noreferrer noopener">Gemini</a>, <a href="https://cms.blockworks.co/blockfi-releases-visa-rewards-credit-card-to-us-clients/" target="_blank" rel="noreferrer noopener">BlockFi</a> and <a href="https://cms.blockworks.co/sofi-offers-crypto-for-credit-card-rewards/" target="_blank" rel="noreferrer noopener">SoFi</a> launched reward cards that let cardholders earn percentages back in crypto-based rewards on their purchases.



Coinbase has Money Transmitter Licenses <a href="https://www.coinbase.com/legal/licenses" target="_blank" rel="noreferrer noopener">in most states</a>, and its Visa card is issued by financial services company MetaBank, however Coinbase itself does not clarify if direct deposits held in US dollars are protected by Federal Deposit Insurance Corporation guarantees. <a href="https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured" target="_blank" rel="noreferrer noopener">Documentation</a> from Coinbase clearly indicates that USDC, the platform’s primary stablecoin — as well as any cryptocurrency balances — are not insured.



According to the company, when US customer funds are held as cash, &#8220;they are maintained in pooled custodial accounts at one or more banks insured by the FDIC&#8230;in a manner to make available pass-through FDIC insurance up to the per-depositor coverage limit then in place (currently $250,000 per individual),” however, pass-through insurance typically <a href="https://www.sewkis.com/publications/fdic-requirements-for-pass-through-deposit-insurance-in-brokered-deposit-programs/">does not apply</a> to pooled custodial accounts under US law, and this implied-guarantee has never been put to the test.



Coinbase is also exploring additional use cases for crypto payroll, Hariramani said, but he did not share any additional details for future plans. “As crypto becomes more mainstream, users and employers will continue to benefit from a crypto payroll solution,” he added.



<h3>Growing demand for direct deposits into crypto</h3>



Coinbase isn’t the only platform to see demand for direct deposits, either.&nbsp; Chris Kline, COO and co-founder of Bitcoin IRA, a platform for holding digital assets in retirement accounts, said that he’s seeing an uptick in requests from users to be able to add portions of their paychecks to their self-directed IRA accounts.&nbsp;



<blockquote class="wp-block-quote">“People actively designating a piece of their payroll to be turned into bitcoin and then securely having it added to their personal savings wallet is a trend I think we’ll continue to see,” Kline added.</blockquote>



Even though digital asset prices are notoriously volatile, Kline said he thinks direct deposit of cryptocurrencies will also see more widespread adoption soon. “This is a positive for the crypto ecosystem because it means more participants will be taking part in an engaging asset class, leading to more active and engaged investors watching their personal finances.”



This story has been updated on September 27, 2021, at 4:44 pm ET



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Coinbase’s New Direct Deposit Feature Allows Users to Get Paychecks in Crypto

Sam Reynolds

<div id="highlights-block_61423045a19fb" class="highlights">
 <ul>
 <li>Licensed digital assets platform Oasis Pro Markets announced that it had partnered with Anchorage for Custody and Settlement</li>
 <li>Anchorage Digital has been reported to be nearing a deal with the FDIC to help it custody digital assets</li>
 </ul>
 
</div>



One of the few exchanges to have an Alternative Trading System (ATS) license announced today a partnership with digital asset bank Anchorage for on-chain custody and settlement.



“Anchorage has been a true partner in helping us realize our goal of streamlining the trading experience for institutional investors looking to access secondary market liquidity for digital securities,” said Pat LaVecchia, CEO of Oasis Pro Markets in a release. “Anchorage’s superior settlement and custody technologies stand out in the market, as they provide the controls for selecting digital assets, reaffirming our commitment to remain agile to technological and regulatory developments to grow the ecosystem and create a dynamic marketplace.”



Oasis Pro Markets says its trading platform will offer equity, fixed income, and asset-backed securities when it launches. The company says it will first launch on the Ethereum blockchain and will support other blockchain protocols soon after.



Digital asset bank Anchorage has been <a href="https://decrypt.co/80403/fdic-deal-crypto-custodian-anchorage-manage-assets-failed-banks" target="_blank" rel="noreferrer noopener">reported to be close</a> to signing a deal with the FDIC to be a cryptocurrency custodian for the institution. As more and more banks begin to adopt digital assets, the FDIC needs infrastructure in place to custody and store these assets should it need to step in during a bank failure. This also shows how established Anchorage, with its charter, has become within the broader financial industry.&nbsp;



When it launches, Oasis Pro Markets will be an institutional and accredited focused exchange. ATS platforms are licensed by the SEC in dealing with securities and are members of FINRA, a self-regulatory organization for the broker-dealer industry.&nbsp;



Coinbase is not registered with the SEC as an ATS platform and the problems with this arrangement are beginning to show. Recently, SEC chair Gary Gensler <a href="https://cms.blockworks.co/gensler-investors-are-not-protected-when-it-comes-to-crypto/">took aim at Coinbase</a> during testimony before the Senate Banking Committee saying it lists “dozens of tokens that might be securities.”



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Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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