The Federal Deposit Insurance Corporation (FDIC) has reportedly demanded that potential rescuers of failed U.S. banks stop all cryptocurrency services, according to a report from Reuters. Specifically, the FDIC has required buyers of Signature Bank to give up all cryptocurrency business at the bank.

The FDIC has committed to making all depositors whole at failed banks, regardless of whether or not they are insured. This may require swift action from the federal agency. As potential buyers circle the failed lender, the FDIC is requiring them to adhere to the terms of the agreement.

Furthermore, according to people familiar with the case, the FDIC will only consider offers from banks that already have a bank charter, favoring traditional lenders over private equity groups.

Signature Bank is a significant crypto-friendly bank in the United States, well known for its collaborations with the Coinbase exchange, Paxos Trust, BitGo, and bankrupt crypto lender Celsius. Even though Signature is a major player in the cryptocurrency industry, its deposit base is mostly comprised of middle-market enterprises such as real estate and legal firms.

When the crypto-friendly Silvergate Bank failed last week, numerous crypto businesses went to Signature. This caused several of Signature's more conventional clients to seek safer alternatives.

On March 12, the New York State Department of Financial Services formally closed and took over Signature, naming the FDIC as a receiver. To safeguard depositors, the FDIC transferred all of Signature Bank's savings and assets to Signature Bridge Bank.

FDIC may not have enough funds in its insurance fund to repay all depositors if they withdraw money immediately from failed banks. Nevertheless, the government has pledged a backstop, which makes it highly unlikely that all depositors will withdraw all at once. Furthermore, the failed banks possess billions of dollars in Treasuries and loans that can be liquidated and utilized to compensate most depositors.