FlowBank Shut Down Amid Serious Regulatory Breaches

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FlowBank, a Swiss online bank known for its cryptocurrency trading services, has been ordered to shut down and declare bankruptcy after the Swiss Financial Market Supervisory Authority (FINMA) determined it had “seriously breached” operational standards required for banking. This decisive action underscores the importance of regulatory compliance and the potential consequences of failing to meet financial standards in the banking sector.

In a statement issued on June 13, FINMA explained that the closure was unavoidable as FlowBank no longer possessed the minimum capital necessary for its business operations. The regulator also highlighted the absence of any viable restructuring plan and raised concerns about the bank’s solvency, indicating that FlowBank might be over-indebted.

FlowBank Regulatory Oversight and Breaches 

FlowBank, which began operations in 2020, was prominent in the crypto trading space and served as the banking partner for Techteryx, the stablecoin issuer behind TrueUSD (TUSD). It was partly owned by CoinShares, a crypto asset management firm, and reportedly provided banking services to Binance, the world’s largest cryptocurrency exchange.

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Despite its promising start, FlowBank quickly attracted regulatory scrutiny. FINMA’s enforcement action against the bank began as early as October 2021, just a year after its launch. The initial investigation revealed serious breaches of supervisory law, particularly in relation to capital requirements. This prompted the appointment of an independent auditor to oversee FlowBank’s efforts to return to compliance.

By June 2023, further issues surfaced, prompting FINMA to appoint another supervisor to closely monitor FlowBank’s financial activities. This subsequent investigation uncovered multiple high-risk business relationships and significant transactions that were processed without proper due diligence, exacerbating concerns about the bank’s operational integrity.

License Revocation and Legal Proceedings

In response to these findings, FINMA ordered the revocation of FlowBank’s banking license on March 8, 2024. However, this decision is currently under appeal at the Federal Administrative Court, meaning it has not yet taken legal effect. Despite the pending appeal, the regulator’s determination to shut down FlowBank signals a firm stance on maintaining stringent banking standards.

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FINMA has emphasized its commitment to protecting FlowBank’s customers during this turbulent period. Clients with deposits up to 100,000 Swiss francs (approximately $111,710) are guaranteed to be prioritized in the recouping process. The regulator is working to ensure that these funds are returned “as quickly as possible.”

FlowBank and its Operations

FlowBank, which had amassed total assets of 760 million Swiss francs (about $680 million), managed over 22,000 client accounts and employed around 140 staff globally. The bank’s rapid expansion and subsequent downfall highlight the volatile nature of the financial sector, particularly within the emerging field of cryptocurrency.

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