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The Swiss regulator FINMA has announced the closure and bankruptcy of FlowBank due to severe capital deficiencies
FlowBank offered cryptocurrency custody services to customers, with Binance signed up
Crytpo holdings are not secured and holders face an anxious wait
Switzerland’s financial regulator, FINMA, has announced the closure and bankruptcy of FlowBank, an online bank that provided its customers with exposure to cryptocurrency. The decision was made public on Thursday, with FINMA citing severe capital deficiencies as the primary reason for the bank’s shutdown. Customers with deposits up to 100,000 Swiss francs (approximately $111,700) that their funds are protected and will be returned within seven working days.
FlowBank Cannot Back All Customers’ Assets
FlowBank launched in 2020, establishing notable ties with the cryptocurrency sector. In 2021, crypto asset manager CoinShares purchased a 9% stake in the bank for $11.8 million, enabling FlowBank to offer its customers the ability to buy, sell, and hold cryptocurrencies and other tokenized assets directly through their accounts.
Earlier this year, it was reported that Binance would allow larger traders to hold their crypto assets at FlowBank or Sygnum, another Swiss bank known for its crypto-friendly stance, but things seem to have gone rapidly downhill since then: FINMA alleges that FlowBank has significantly and seriously breached minimum capital levels, expressing well-founded concerns that the bank is currently over-indebted with no viable prospects for restructuring.
Crypto Holdings in Limbo
FINMA claims that FlowBank no longer meets the necessary capital requirements for its operations, with a letter posted on FlowBank’s website confirming the regulator’s decision and its imminent shutdown. Swiss law firm Walder Wyss has been appointed as the bankruptcy liquidators for the bank, tasked with managing the bankruptcy proceedings.
FINMA has assured FlowBank customers with deposits up to 100,000 Swiss francs (approximately $111,710) that their funds are protected and will be returned within seven working days. However, the future of customers’ cryptocurrency holdings remains uncertain; the regulator indicated that it would be up to the liquidators to determine whether these digital assets would be treated as custody assets, similar to securities, or as claims on the bank.
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