FINMA Orders Closure of Crypto Bank FlowBank, Begins Liquidation

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As a researcher with personal experience in the Swiss financial industry, I find the situation with FlowBank and its closure by FINMA to be a significant development. The lack of proper capital and deep debt reportedly held by FlowBank was a clear violation of minimum requirements set forth by FINMA. The consequences of this violation have left some uncertainty for customers, particularly those with crypto deposits.

The Financial Market Supervisory Authority (FINMA) of Switzerland, acting as the regulatory body, announced the insolvency of FlowBank and initiated closure proceedings. Reports suggested that the bank was insufficiently capitalized and heavily in debt, leading to this outcome. Deposits worth up to 100,000 Swiss francs are safeguarded, but the status of its crypto assets remains uncertain.

FlowBank Shut Down by Swiss Regulator FINMA

FlowBank, an online Swiss bank specializing in cryptocurrencies, has been forced to close its doors by the Swiss Financial Market Supervisory Authority (FINMA). The reason for this unexpected move is that FlowBank failed to meet the necessary capital requirements to sustain its business activities. FINMA went on to reveal that FlowBank had significantly breached the minimum capital thresholds and exhibited a high level of debt, raising serious concerns about its financial health. Consequently, FINMA does not anticipate any major transformations in FlowBank’s organizational structure in the near future.

FlowBank recently announced in a letter on its website that they have received approval from FINMA for the bank’s closure. As a result, all webpages have been redirected to this notice. Walder Wyss, a reputable Swiss law firm, has been designated as the bankruptcy liquidator to manage the bank’s shutdown and address customer concerns effectively.

Established in 2020, FlowBank is a modern financial institution that maintains robust links to the cryptocurrency industry. In the year 2021, CoinShares, a prominent crypto asset management firm, purchased a 9% stake in FlowBank for approximately $11.8 million. This investment empowered FlowBank to offer its clientele the opportunity to buy, sell, and store digital currencies and other tokenized assets within their accounts. This feature distinguishes FlowBank as one of the pioneering banks in the crypto financial services sector.

In the initial three months of the year, it became known that Binance, the foremost global cryptocurrency exchange, intended to enable certain institutional clients to securely hold their digital assets with FlowBank. This alliance signified FlowBank’s robust involvement in the crypto market. Nonetheless, this collaboration’s termination raises questions about the future of such arrangements and the potential repercussions for banks that cater to cryptocurrencies.

Crypto Deposit Fate Unclear Post-Bank Closure

As a researcher studying this situation, I can tell you that the recent announcement by FINMA brings some reassurance to FlowBank’s conventional deposit holders, as they will have their funds returned within a week if their balance is under 100,000 Swiss francs. However, the fate of crypto deposits remains uncertain. Based on FINMA’s statement, it appears that the responsibility for determining whether these cryptocurrencies are considered custody assets or claims on the bank rests with the liquidator.

The difference is important to note. If cryptocurrencies are categorized as custody assets, they will be managed similarly to securities during bankruptcy proceedings, potentially offering enhanced security for crypto holders. However, if considered as claims against the bank, recovering these assets could become a more intricate process. This ambiguity raises concerns for customers utilizing FlowBank’s crypto services.

As a crypto investor, I’ve been keeping an eye on the developments surrounding FlowBank’s closure. This news comes at a time when there are changes happening within FINMA’s upper echelons. In early 2024, they brought in Stefan Walter, a former European Central Bank chief, as their new CEO. His tenure began on April 1, 2024, following the departure of Urban Angehrn who stepped down due to health concerns the previous year. The shift in leadership at FINMA could indicate a fresh regulatory perspective in the Swiss financial sector, making it an intriguing time for investors like me to observe and adapt accordingly.

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2024-06-13 19:42