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In another major blow to the crypto industry, regulators announced the shutdown of yet another crypto-friendly bank aka Signature Bank. The collapse of Silicon Valley Bank (SVB) last week has already sent tremors in the crypto space.
These lenders counted on a number of crypto companies as their potential customers. Both signature and Silvergate were supporters of digital assets liquidity enabling fast payments among customers, exchanges, and hedge funds.
Signature ran a payment network dubbed Signet allowing its crypto clients to make real-time payments in dollars at any time, 24 x 7. Big market players like Coinbase integrated Signet last October, to allow its institutional clients to instantly transfer funds.
Now With Signet going out of operations, it would severely impact the users’ ability to rapidly move money in and out of exchanges, thereby severely impacting the crypto market liquidity.
New York State Regulators Shut Down Signature Bank
The announcement of shutting down Signature Bank came through New York state regulators on Sunday, March 12. It also notes that all depositors will have access to their money on Monday. In a tweet over the last weekend, Binance chief Changpeng Zhao stated that this seems to be a “coordinated effort to shut down crypto-friendly banks”.
Similar to other banks, Signature Bank also faced strong withdrawal of deposits after the FTX collapse. However, it still has $16.5 billion in client deposits as of March 8, reported Bloomberg.
Commenting on the closure of Signature Bank, the New York State regulators noted:
It was “in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators” to protect both consumers and the financial system. No losses will be borne by the taxpayer.”
The FDIC has also issued a “bridge” successor bank to enable Signature customers to access their funds on Monday morning, March 13. New York Gov. Kathy Hochul stated that these efforts by the regulators would provide increased confidence in the stability of the US banking system. “Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy,” she said.
The issuer of BUSD stablecoin Paxos Global announced that it holds $250 million at Signature Bank along with private deposit insurance in excess of the cash balance. “All Paxos stablecoin reserves are fully-backed and redeemable to customers 1:1 with the U.S. dollar at all times,” it added.
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