A chaotic run for the financial sector continues as the New York state regulator has shuttered another crypto-friendly bank, Signature, citing systemic risks.
In a press release on Sunday, March 12th, the New York Department of Financial Services (DFS) announced that it has taken possession of Signature Bank, one of the biggest lenders in the crypto industry. The latest bank closure came less than 48 hours after Silicon Valley Bank (SVB) collapsed on Friday, March 10th.
Depositors will be Made Whole
According to DFS, it has appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of the bank, which has “total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022.”
In a joint statement, the Department of Treasury, the Federal Reserve, and FDIC cited systemic risks for this move and said that all depositors would be protected except shareholders and unsecured debtholders. The statement reads:
“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.”
Signature Bank is a major lender to the cryptocurrency sector with crypto exchange Coinbase and Paxos as its major customers. Following the development, Coinbase tweeted that it had an “approximately $240m balance in corporate cash at Signature” as of March 10.
According to stablecoin issuer Paxos Global, it “currently holds $250M at Signature Bank and holds private deposit insurance well in excess of our cash balance and FDIC per-account limits.”
Signature Bank marks the third bank collapse in under a week, following Silvergate Bank’s voluntary liquidation and Silicon Valley Bank (SVB).
Regulators closed down SVB on Friday, March 10. FDIC has taken control of the bank and announced that:
“Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
SVB also had close ties with the crypto sector. Following the shutdown of the bank, Circle revealed that around $3.3 billion of its $40 billion USDC reserves remained at Silicon Valley Bank (SVB).
Circle CEO Jeremy Allaire, on Monday morning, tweeted that 100% USDC reserves were safe and they would now use BNY Mellon to facilitate the process of minting and redemption.
