Swiss Regulator Shutters Crypto-Linked FlowBank, Begins Bankruptcy Process

FlowBank Shut Down by Swiss Financial Regulator, Declared Bankrupt

Key Points:

1. Regulatory Action:

• The Swiss Financial Market Supervisory Authority (FINMA) has shut down FlowBank, citing insufficient capital for bank operations and significant breaches of minimum capital requirements.
• FINMA expressed concerns about FlowBank being over-indebted with no viable prospects for restructuring.

1. Appointment of Liquidators:

• Walder Wyss, a prominent Swiss law firm, has been appointed by FINMA as the bankruptcy liquidators for FlowBank.

1. Bank’s Crypto Involvement:

• FlowBank launched in 2020 and had significant ties to the crypto industry.
• In 2021, crypto asset manager CoinShares acquired a 9% stake in FlowBank for $11.8 million, which enabled the bank to offer crypto-related services to its customers.
• FlowBank allowed customers to buy, sell, and hold crypto and tokenized assets directly from their accounts.

1. Customer Protection and Recovery:

• According to FINMA, FlowBank customers with deposits up to 100,000 Swiss francs (approximately $111,710) are protected and will receive their money back within seven working days.
• The status of customers’ crypto deposits remains uncertain. The liquidator will determine if these assets will be treated as custody assets (like securities) or as claims on the bank in the bankruptcy process.

1. Impact and Next Steps:

• FlowBank’s website and social media accounts have been deactivated, directing customers to the notification letter about the shutdown.
• The future of FlowBank’s operations and customer assets will be managed by the appointed liquidators, with further information likely to emerge as the liquidation process progresses.

Implications for Crypto Market:

• Investor Confidence: The shutdown of FlowBank highlights the risks associated with financial institutions heavily involved in crypto, potentially affecting investor confidence in similar banks.
• Regulatory Scrutiny: This event may prompt increased regulatory scrutiny on banks and financial institutions offering crypto services, emphasizing the importance of maintaining sufficient capital reserves and compliance with regulatory standards.
• Customer Asset Security: The uncertainty regarding the treatment of crypto deposits in FlowBank’s bankruptcy process underscores the need for clear regulations and protections for crypto assets held by financial institutions.

The shutdown of FlowBank serves as a critical reminder of the financial and regulatory challenges faced by banks in the rapidly evolving crypto industry.