Signature Bank Gets Shut Down By State Regulators

March 16, 2023 4:15 pm Comments

It looks like Silicon Valley Bank is not the only bank that has recently collapsed as news has revealed that Signature Bank has also been closed by regulators.

This may have some impact to the crypto industry due to the fact that Signature Bank is known as one of the biggest banks that are used by crypto companies.

The bank had around $88 billion in deposits and the bank has now been taken over by the New York Department of Financial Services.

What is important to note is that Coinbase had revealed that they had around $240 million in cash deposited at the bank which has worried some crypto investors.

With that being said, the general consensus is that the funds are only on hold and those funds were not used for client transactions.

TheVerge reports:

Additionally, the Fed’s announcement said that depositors at Silicon Valley Bank will also be made whole. That’s good news for crypto — since stablecoin provider Circle was keeping $3.3 billion of its reserves there. Circle operates USDC, a token that is always meant to be worth $1 — and an important part of crypto payments.

Circle is affected by Signature’s closing, too. It will use BNY Mellon instead, said CEO Jeremy Allaire in a tweet.

Also in the statement, the regulators said that depositors of Silicon Valley Bank, a non-crypto bank that failed on March 10 following a bank run, will have access to their uninsured deposits on Monday.

The statement noted that in both cases, no losses would be paid for by taxes.

With the government stepping in and essentially protecting depositors from losing uninsured deposits, it seems that a full-scale banking crisis has been temporarily avoided.

However, many are concerned that this could be the start of many banks experiencing the same situation as part of a bigger problem.

After all, the Fed had raised interest rates at an extremely rapid rate which may have caught some banks in an unprepared situation.

The good news is that crypto was designed for situations like this as it allows customers to actually be their own bank and have custody of their own assets.

Still, the collapse of two major crypto banks will likely have short term consequences for the crypto markets and may delay the next bull run.

CoinDesk reports:

“Signature Bank is a New York state-chartered commercial bank and is FDIC-insured, with total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022,” Harris’ statement said.

“DFS is close contact with all regulated entities in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators to protect consumers, ensure the health of the entities we regulate, and preserve the stability of the global financial system.”

“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the joint Fed/FDIC/Treasury statement said.

The move came mere months after Signature announced it would be reducing its exposure to the crypto sector.

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