- In a week, three banks key to the crypto sector – Silvergate, Silicon Valley Bank, and Signature – have collapsed.
On Sunday, the US state regulators closed Signature Bank, a crypto-friendly financial institution, two days after shuttering Silicon Valley Bank, citing systemic risks, efforts to stabilize the financial sector, and depositor protection.
Based in New York, Signature Bank had $110.4 billion in total assets and $82.6 billion in deposits as of December 31, according to a statement by the Federal Deposit Insurance Corporation (FDIC), which has since taken over as a receiver. FDIC has created a ‘bridge’ bank to hold the assets of Signature and facilitate depositors’ compensation.
‘‘Signature Bank was closed today by the New York State Department of Financial Services, which appointed the Federal Deposit Insurance Corporation as the receiver. To protect depositors, the FDIC transferred all the deposits and substantially all the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders,’’ FDIC said.
Impact On The Cryptocurrency Sector
The collapse could significantly impact the cryptocurrency space, with the number of crypto-related deposits at $16.52 billion, roughly a quarter of its total, according to the information shared with The New York Times. The lender entered the crypto business in 2018 and banked for major companies, including Coinbase, which has disclosed an exposure of $240 million, and Paxos, which said it had $250 million.
Signature bank’s demise – affecting its 40 branches in New York, California, North Carolina, and Nevada – also destabilized stablecoins. TrueUSD, a stablecoin issued by the Singapore-based Techteryx, was forced to halt minting and redemption for users using the bank.
‘‘The US government announced the closure and backstopping of Signature Bank. As a result, TrueCoin paused TUSD minting and redemption for our small number of Signature Bank users. Minting and redemption continue unaffected across the rest of our banking network,’’ said the stablecoin issuer. TrueUSD keeps its reserves across banks domiciled in the US, Hong Kong, and the Bahamas.
FDIC maintains that all the depositors at the institution would be made whole, but no losses would be borne by the taxpayers. Furthermore, shareholders and a section of unsecured depositors are not protected.
