Swiss encrypted bank FlowBank declared bankrupt by local financial authority is cryptocurrency to blame
As a partner of the stablecoin TrueUSD (TUSD) and the exchange Binance, the Swiss Financial Market Supervisory Authority (FINMA) forced the encrypted bank FlowBank into bankruptcy proceedings yesterday (13), citing serious violations of the minimum capital requirements for operating a bank, excessive debt, and almost no possibility of restructuring.
FINMA pointed out in its latest statement that it initiated bankruptcy proceedings for the encrypted bank FlowBank on June 13, stating that the bank no longer had sufficient funds to continue its operations.
FlowBank, which holds approximately $7.6 billion in assets and has over 22,000 users, is said to have violated regulations significantly, particularly in terms of capital requirements, organizational structure, and risk management.
The bank established many high-risk business relationships and processed large transactions without a comprehensive assessment, according to FINMA. Concerns were raised that the bank may not be able to cover its debts.
FlowBank has stated on its official website that users with deposits below 100,000 Swiss francs (approximately $111,000) will be protected and reimbursed within 7 working days.
FINMA also emphasized in its statement that existing funds will be fully reimbursed to users, and therefore, the Swiss Bank Depositor Protection Scheme (esisuisse) will not be involved in assisting.
The future of users’ encrypted assets remains uncertain, as FINMA suggested that whether encrypted currencies can be treated as custodial assets like securities and included in bankruptcy proceedings will depend on the liquidator.
FlowBank, established in 2020, has been providing encrypted currency trading services for years, and is known to be a controversial partner of TrueUSD (TUSD) and to provide custody services for encrypted assets to Binance.
The bankruptcy of FlowBank raises questions about the risks associated with high-risk businesses related to encrypted currencies, as well as the financial crisis faced by traditional banks, encrypted banks, or exchanges due to improper portfolio allocation and changes in interest rate policies.
