New York regulators have shuttered Signature Bank, one of the primary US banking options for cryptocurrency firms. This marks the third significant bank to fail within a week, causing unease among investors.
In a collaborative statement, the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation promised that all depositors would receive compensation. The joint announcement, assuring customers that their funds would not be seized, was likely issued to assuage these concerns.
As of December 31, 2022, Signature held $88.59 billion in deposits, and the New York Department of Financial Services seized the bank.
Signature Bank was among the top two banking options frequently utilized by cryptocurrency firms. Similar to Silvergate, which disintegrated on March 8th, Signature had a system that allowed crypto companies to transfer dollars instantly.
With both of these crypto banks gone, the process of converting cryptocurrency to dollars could become more challenging.
According to a Twitter post by the company, crypto exchange Coinbase had $240 million in cash held at Signature Bank. However, due to the suspension of Signature’s funds, Coinbase will collaborate with alternative banking partners for its clients’ transactions.
Furthermore, the Federal Reserve’s announcement specified that depositors at Silicon Valley Bank would also receive full compensation.
This is good news for the cryptocurrency industry as stablecoin provider Circle had placed $3.3 billion of its reserves at Silicon Valley Bank. Circle manages USDC, a token that is always valued at $1 and plays a crucial role in cryptocurrency payments.
Circle has also been impacted by Signature Bank’s closure. According to a tweet by its CEO, Jeremy Allaire, Circle will shift to BNY Mellon to compensate for this loss.
Furthermore, the regulatory bodies stated in the announcement that depositors of Silicon Valley Bank, a non-cryptocurrency bank that collapsed on March 10 due to a bank run, would be able to access their uninsured deposits on Monday.
The statement highlighted that in both instances, taxpayers would not be responsible for any losses.