The Swiss Financial Market Supervisory Authority (FINMA) has announced the forced closure and bankruptcy of FlowBank, a Swiss online bank known for its cryptocurrency trading services. This decision comes after a regulatory investigation revealed significant breaches of banking standards and insufficient capital reserves.
On June 13, 2024, FINMA declared the shutdown and subsequent bankruptcy of FlowBank, citing severe non-compliance with financial regulations. The regulator’s statement highlighted that FlowBank failed to maintain the minimum capital required for its business operations, which rendered any prospect of restructuring unfeasible and raised concerns about the bank’s solvency.
FINMA’s investigation found that FlowBank was severely undercapitalized and over-indebted, making its continued operation unsustainable. As a result, the regulator concluded that the bank must be wound up to protect the interests of its customers and maintain the integrity of the financial system.
FlowBank’s Operations and Partnerships
Founded in 2020, FlowBank offered a range of financial services, including cryptocurrency trading. It quickly became a key player in the digital asset space, partnering with notable entities such as Techteryx, the issuer of the stablecoin TrueUSD (TUSD). FlowBank was also part-owned by CoinShares, a prominent crypto asset management firm, and reportedly provided banking services to Binance, the world’s largest cryptocurrency exchange.
Financial and Customer Impact
Despite its rapid growth and strategic partnerships, FlowBank’s financial troubles have now led to significant customer impact. FINMA has assured that depositors with up to 100,000 Swiss francs ($111,710) will be prioritized for protection. The regulator is working to facilitate the quick return of these funds to affected clients.
FlowBank’s balance sheet at the time of its closure showed assets totaling 680 million Swiss francs ($760 million), more than 22,000 client accounts, and a global workforce of around 140 employees.
| Metric | Value |
|---|---|
| Total Assets | 680 million Swiss francs ($760 million) |
| Client Accounts | Over 22,000 |
| Employees | Approximately 140 |
| Protected Deposits | Up to 100,000 Swiss francs ($111,710) |
FlowBank’s regulatory troubles date back to October 2021, when FINMA first took enforcement action against the bank. At that time, the regulator identified serious breaches of supervisory law, particularly concerning capital requirements. This prompted the appointment of an independent auditor to monitor FlowBank’s efforts to regain compliance.
However, further issues emerged in June 2023, leading FINMA to appoint another supervisor to closely examine FlowBank’s financial activities. This investigation uncovered numerous high-risk business relationships and significant transactions that were processed without adequate due diligence, further compromising the bank’s regulatory standing.
In light of these findings, FINMA ordered the withdrawal of FlowBank’s banking license on March 8, 2024. This ruling is currently under appeal at the Federal Administrative Court, meaning it has not yet taken full legal effect.
| Date | Regulatory Action |
|---|---|
| October 2021 | FINMA identifies serious supervisory law breaches. |
| October 2022 | Independent auditor appointed to monitor compliance efforts. |
| June 2023 | Supervisor appointed for further investigation of financial activities. |
| March 8, 2024 | Withdrawal of FlowBank’s banking license ordered by FINMA. |
| June 13, 2024 | FINMA announces the forced closure and bankruptcy of FlowBank. |
The forced closure of FlowBank serves as a stark reminder of the stringent regulatory requirements that financial institutions must adhere to, particularly in the rapidly evolving landscape of digital assets. It underscores the importance of maintaining adequate capital reserves and conducting thorough due diligence, especially for banks involved in high-risk sectors like cryptocurrency trading.
As the industry continues to grow and attract more mainstream attention, the need for clear and enforceable regulations becomes increasingly crucial. The FlowBank case may prompt other crypto-friendly banks to reassess their compliance frameworks and financial health to avoid similar outcomes.
For customers and stakeholders, the swift actions by FINMA illustrate the critical role of regulatory bodies in protecting the financial system’s integrity and the interests of consumers. As FlowBank navigates its bankruptcy proceedings and the pending appeal, the focus will remain on ensuring that affected clients are compensated and that the lessons learned contribute to a more robust financial regulatory environment.
Featured image credit: Ahmad Wafir via Vecteezy