In a shocking move, New York regulators have closed down Signature Bank, one of the top destinations for crypto companies in the US. This follows the collapse of two other major banks in just one week, causing concern among investors.
However, the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation have issued a joint statement assuring depositors that they will be fully protected, beyond the standard $250,000 guaranteed by the FDIC. This is intended to reassure banking customers that their money will not be frozen, and all depositors will be made whole.
As of December 31, 2022, Signature Bank had a whopping $88.59 billion in deposits. The New York Department of Financial Services has taken possession of the bank, leaving many crypto companies without a reliable banking partner.
Signature Bank was one of two banks that was widely used in the cryptocurrency space, along with Silvergate. Both banks provided a network that allowed crypto companies to transfer dollars in real-time. However, with the collapse of both banks, it may become more challenging for crypto companies to convert their digital assets into dollars.
Crypto exchange Coinbase is among the companies affected by Signature Bank’s closure. The exchange had $240 million in cash at Signature, which is now frozen. Coinbase will now use other banking partners for client transactions.
On the bright side, the Fed’s announcement also stated that depositors at Silicon Valley Bank will be made whole. This is good news for crypto, as stablecoin provider Circle had $3.3 billion of its reserves held there. Circle operates USDC, a token that is always intended to be worth $1, and is a crucial component of crypto payments.
However, Circle is also affected by Signature Bank’s closure and will now use BNY Mellon instead, according to CEO Jeremy Allaire.
In the same joint statement, regulators confirmed 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 also emphasized that there will be no losses paid for by taxes in either case.
Overall, the closure of Signature Bank has sent shockwaves through the crypto industry. While the joint statement from regulators offers reassurance, it remains to be seen how quickly crypto companies can adapt to the loss of a reliable banking partner.
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