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FINMA orders the closure of Crypto Bank FlowBank and begins liquidation
The Swiss financial supervisory body, the Financial Markets Supervisory Authority (FINMA), closed FlowBank and declared it insolvent. This came after it was discovered that FlowBank did not have adequate capital and was reportedly heavily indebted. Deposits of up to 100,000 Swiss francs are guaranteed, but the situation with cryptocurrencies is not yet clear.
FlowBank is closed by the Swiss regulator FINMA
FlowBank, a Swiss online bank active in the cryptocurrency sector, has been shut down by the Swiss FINMA. This comes in the context of the bank being found to have inadequate capital to support its operations. FINMA said that FlowBank violated the minimum capital requirements to a very high and severe extent. There are also some valid concerns about the bank’s current high level of debt. FINMA therefore does not foresee any changes to the bank’s structure in the short term.
In a letter to its customers published on the bank’s current website, FlowBank said it had received confirmation from FINMA. All the bank’s web pages were automatically redirected to this notice. The Swiss law firm Walder Wyss has been appointed bankruptcy trustee. This is a correct way to handle the bank closure and meet customer needs.
FlowBank was founded in 2020 and is a contemporary bank with strong ties to the cryptocurrency sector. In 2021, CoinShares, a crypto asset manager, acquired 9% ownership of FlowBank for $11.8 million. This investment allowed FlowBank to offer its customers the ability to buy, sell and hold cryptocurrencies and other tokenized assets through their accounts. This integration has made FlowBank emerge as one of the leading banks in the cryptocurrency sector.
In the first quarter of the year this was reported Binance, the world’s leading cryptocurrency exchange, would allow some institutional clients to store their digital assets with FlowBank. This partnership revealed that FlowBank has a strong presence in the cryptocurrency market. However, the closure has implications for the future of such partnerships and the overall impact on crypto-friendly banks.
The fate of the cryptocurrency deposits is unclear following the bank’s closure
FINMA’s announcement is somewhat comforting for FlowBank customers with conventional deposits. Anyone with an account of up to 100,000 francs will receive their money back within a week. However, the future of customer crypto deposits is less clear. According to FINMA, it is up to the liquidator to ascertain whether these cryptocurrencies constitute assets in custody or claims against the bank.
The distinction is crucial. If classified as assets in custody, cryptocurrencies will be treated as bankrupt securities, which could provide better protection for cryptocurrency holders. On the other hand, if treated as receivables from the bank, the recovery of such assets may be more complex. This uncertainty represents a significant concern for customers who have taken advantage of FlowBank’s crypto services.
The closure of FlowBank comes amid changes within FINMA’s leadership. Earlier this year FINMA appointed Stefan Walter, a former European Central Bank (ECB), as the new CEO, starting from 1 April 2024. This decision follows the resignation of the previous CEO, Urban Angehrn, who left last year for health reasons. The transition to FINMA leadership signals a potentially new regulatory approach in the Swiss financial sector.
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