FlowBank, a Swiss online banking institution that provided services for trading cryptocurrencies, has been closed down and declared bankrupt following a determination by the Swiss financial regulatory body that it had violated essential standards necessary for its banking operations.
In a statement released on June 13, the Swiss Financial Market Supervisory Authority stated that the closure was necessary due to the bank’s failure to maintain the minimum capital required for its operations. Additionally, FINMA expressed concerns about the bank being over-indebted and having no potential for restructuring.
After an investigation conducted the previous week revealed that FlowBank had seriously breached its obligation to maintain adequate capital, FINMA concluded that the bank must be liquidated. FlowBank, which was established in 2020 and offered cryptocurrency trading services, was also the banking partner for Techteryx, the issuer of the stablecoin TrueUSD (TUSD). The bank was partially owned by CoinShares, a crypto asset management firm, and reportedly provided banking services to Binance, the largest cryptocurrency exchange in the world.
FINMA has assured customers with funds up to $111,710 (100,000 Swiss francs) that their assets will be protected, and the regulatory body is working to facilitate the swift recovery of these funds. With total assets of $760 million (Swiss francs 680 million), over 22,000 client accounts, and approximately 140 employees globally, FlowBank has been closely monitored by FINMA since its launch.
Enforcement actions were first taken against FlowBank in October 2021 for serious breaches of supervisory law related to capital requirements. An independent auditor was subsequently appointed to oversee the bank’s efforts to regain compliance. In June 2023, further compliance issues prompted FINMA to assign another supervisor to monitor FlowBank’s financial activities, which revealed risky business relationships and insufficient due diligence in processing large transactions.
Although FINMA revoked the bank’s license on March 8, 2024, the legal impact of this decision is pending an appeal at the Federal Administrative Court. Amidst these developments, the magazine raises concerns about deposit risk and the handling of customer funds by cryptocurrency exchanges.