Crypto markets are shaken by the ongoing decline in Bitcoin price, and the latest news comes from the Federal Reserve. The Federal Reserve has imposed sanctions on the bank formerly known as Moonstone Bank. The FTX incident has consumed almost a year of crypto investors’ time and continues to dominate the agenda. So, what is the background behind this recent incident?
According to the statement made by the Federal Reserve today, action has been initiated against Farmington State Bank and its holding company FBH Corporation based in Washington. Farmington was operating as Moonstone Bank and had direct connections with FTX’s trading company, Alameda.
“The decision of the Board allows the bank’s operations to end in a way that protects the bank’s depositors and the Deposit Insurance Fund. The central bank also prohibits Farmington and FBH from paying dividends or distributing capital, distributing their cash assets, and engaging in certain activities without the approval of auditors.”
The bank made the following statement:
“Bank of Eastern Oregon has obtained all bank regulatory approvals for assuming the deposits of Farmington State Bank and acquiring its assets. The transaction is expected to be completed by August 31, 2023.”
Many US Representatives wrote letters to the Federal Reserve requesting details on how Alameda was able to acquire Moonstone Bank. The letters stated, “The banking system has not been affected by the crypto collapse so far. However, the collapse of FTX shows that crypto can be more integrated into the banking system than regulators are aware of.”
In January, following the collapse of FTX, the Federal Reserve, the Office of the Currency Comptroller, and the Federal Deposit Insurance Corporation issued a warning to banks reminding them of their security and soundness obligations and summarizing the risks in the crypto sector.
This decision coincided with the decline in the price of Bitcoin. The sanctions imposed by the Federal Reserve may have triggered the decline.