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The cryptocurrency markets have been exhibiting several positive signals of recovery, yet, not everyone is optimistic, and financial institutions are rightly cautious about it. For example, the Federal Deposit Insurance Corporation (FDIC) says that traditional financial institutions that offer goods and services related to cryptocurrencies should see this as a high-risk business.

The insurance company said that business models that focus on crypto-related activities or have more direct exposure to cryptocurrency should be cautious about this sector.

Additionally, it stated that the corporation would not relax its vigilance regarding the risks that financial institutions pose to crypto-assets. Furthermore, regulatory bodies will release additional statements regarding the involvement of financial institutions in cryptocurrency-related activities.

Binance Releases Critical Information

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Some banks have taken note of the latest warning, which will directly impact their consumers. For example, Bloomberg says that Binance told its users yesterday that one of its partners, Signature Bank, will no longer handle transactions from fiat currency to cryptocurrency worth less than $100,000.

As part of the bank’s efforts to reduce the risk associated with its exposure to the crypto sector, the new policy will go into effect on February 1st. As a result, it is noteworthy that the share price of Signature Bank dropped by 64% over the previous year.

Additionally, Signature Bank offered its services to the FTX crypto exchange. Reports say that Signature Bank plans to sell up to $10 billion in deposits from crypto-focused businesses and investors to ease the strain that the fall of FTX has put on its business.

Consequently, some Binance users will likely be unable to buy or sell cryptocurrency using fiat currency, at least temporarily. However, this policy change does not impact the users’ ability to exchange one cryptocurrency for another or to transfer their digital assets to another platform.

Binance emphasized that the change in policy implemented by Signature Bank will only affect approximately 0.01% of its customer base. More importantly, the team is diligently searching for a solution for those users who will find themselves without a fiat alternative for withdrawals in one week.

Sadly, some banks avoid crypto out of fear of another industry giant crashing suddenly. However, this occurrence is a warning to crypto players, especially crypto exchanges, that financial organizations no longer view crypto as an instant gold rush possibility.

Therefore, crypto firms must ensure transparency when dealing with players from the traditional finance sector.

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George Ward

By George Ward

George Ward is a crypto journalist and market analyst at Herald Sheets, known for his engaging articles on the latest digital currency trends. With a background in finance and journalism, he presents complex topics accessibly. George holds a degree in Business and Finance from the University of Cambridge.