Crypto-friendly bank Signature partners with Binance USD (BUSD), starting in February, to refuse processing transactions below $100,000

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Crypto-Friendly Bank Tightens Restrictions; Signature Bank Only Supports Large Transfers

Binance has informed Bloomberg that one of its banking partners, Signature Bank, will no longer support transactions below $100,000 for exchange customers starting on February 1. This means that retail customers of some exchanges will no longer be able to use the bank for small-dollar transfers to buy and sell cryptocurrencies. Binance stated that they are actively seeking alternative solutions as currently only 0.01% of their users are serviced by Signature Bank each month.

FDIC Issues Warning, Impacting Bank Attitudes

On January 5, the FDIC (Federal Deposit Insurance Corporation) along with the Federal Reserve and the Office of the Comptroller of the Currency issued a joint statement stating that events over the past year have shown strong volatility and vulnerabilities in the cryptocurrency space. While within legal limits, banks are not prohibited from serving related customers.

However, the FDIC and other agencies warned that an overly concentrated business model in the cryptocurrency space could pose significant security and stability risks. These agencies will closely monitor banks' exposure to crypto assets.

Crypto-Friendly Banks Borrow Billions from FHLBs

The Federal Home Loan Banks (FHLBs) are composed of 11 government-chartered cooperatives that supported home financing during the Great Depression and now serve as a low-cost borrowing channel for banks. Details in the Podcast.

According to the Wall Street Journal, Signature Bank borrowed nearly $10 billion in the fourth quarter, marking the largest loan since early 2020.

Additionally, another crypto-friendly bank, Silvergate, which has dealings with FTX, borrowed $4.3 billion. Looking back: Despite incurring losses of $900 million, can Silvergate survive?

While FHLBs are a common tool for aiding bank liquidity, critics argue that using them to support the crypto industry is far from their original intent.

Crypto-friendly banks providing fiat access for crypto customers and custody of cryptocurrencies are also facing liquidity risks during the crypto bear market, which is becoming an issue that cannot be ignored. U.S. Senator Elizabeth Warren has pointed out that this is the risk of cryptocurrencies blending into the traditional financial system.