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This post was originally published on cryptonewsfarm.com
Swiss Crypto-Friendly Bank FlowBank Fails to Meet Capital Requirements, Forced into Bankruptcy
FlowBank, a Swiss online bank known for its cryptocurrency trading services, has been forced to shut down and enter bankruptcy proceedings. This drastic step follows a ruling by the Swiss Financial Market Supervisory Authority (FINMA) after finding the bank in “serious breach” of capital requirements needed to operate.
“The bank no longer has the minimum capital required for its business operations,” stated FINMA in a press release on June 13th. They further revealed concerns about FlowBank’s potential over-indebtedness and concluded that “no prospect of restructuring” existed. This decision comes after an investigation by FINMA last week uncovered significant capital deficiencies, ultimately leading to the forced closure.
Launched in 2020, FlowBank provided cryptocurrency trading and served as the banking partner for Techteryx, the issuer behind the popular stablecoin TrueUSD (TUSD). Notably, the crypto asset management firm CoinShares held partial ownership of FlowBank, and reports indicate they even offered banking services to Binance, the world’s leading cryptocurrency exchange.
While unfortunate, FINMA emphasized that customers with deposits up to $111,710 (100,000 Swiss francs) will receive priority protection. The regulatory body is committed to helping them recoup these funds “as quickly as possible.”
At the time of closure, FlowBank boasted $760 million (Swiss francs 680 million) in total assets, managed over 22,000 client accounts, and employed roughly 140 staff globally.
History of Regulatory Scrutiny for FlowBank
Interestingly, FlowBank wasn’t new to FINMA’s radar. Just a year after its launch in 2020, the Swiss financial regulator flagged the bank for “serious breaches of supervisory law” relating to capital requirements. This resulted in enforcement action and the appointment of an independent auditor in October 2021 to monitor FlowBank’s progress towards compliance.
However, further issues emerged in June 2023, prompting FINMA to assign another supervisor to closely monitor FlowBank’s financial activities and delve deeper into its compliance failures. This investigation uncovered “numerous higher-risk business relationships” and instances where large transactions were processed without proper due diligence – critical aspects of financial oversight.
Based on these findings, FINMA revoked FlowBank’s banking license on March 8th, 2024. However, this decision is currently under appeal at the Federal Administrative Court and hasn’t taken legal effect yet.
FlowBank’s closure underscores the importance of strict financial regulations within the cryptocurrency space. While the bank offered innovative financial products like crypto trading, its failure to meet capital requirements highlights the need for robust oversight to protect both consumers and the broader financial system.
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Author: Sb
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