Signature Bank, a New York-based financial institution, has been shut down by the United States Federal Regulators.
Signature Bank Shut Down by State Regulators
The news of the closure came after the recently collapsed Silicon Valley Bank. While many people attributed the closure of Signature Bank to Silicon Valley Bank, the authorities stated that it was seized to protect the financial system. Signature had deposits totaling $ 88.59 billion. Considering the bank’s relationship with crypto users, we can say that this is bad news for many crypto investors.
Signature Bank’s Entry into Crypto
Signature first accepted cryptocurrency in 2018, adding many crypto investors to its clientele. In 2021, 16% of its deposits consisted of customers from the crypto sector, while this figure increased to 30% in 2023. Signature Bank, which started to be called a crypto bank by many financial institutions and individuals, was closed on March 12, 2023, by the New York State financial services department on the grounds of systemic risk.
Third Bank Closed
The closure of Signature Bank is the third bank collapse news this week. First Silicon Valley Bank and Silvergate Bank, and now Signature. Although the other two banks do not have a high interest in crypto, especially the collapse of Silicon Valley Bank has affected the crypto world. While many crypto companies were affected by the collapse of Silicon Valley Bank, USDC provider Circle took the biggest hit.
Will Signature Bank’s Closure Affect Crypto?
As the 3rd bank to collapse this week, Signature has a higher connection to the crypto sector than other banks. 30% of Signature bank’s deposits consist of customers from the crypto sector. In addition, of the total deposits of $ 88.59 billion, 90% are accounts that are not insured by the FDIC. Looking at these, it can be said that many people may suffer losses.
“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.
Control of the Bank Transferred to the FDIC
Adrianne Harris, superintendent of the New York Department of Financial Services, announced in a statement that control of Signature Bank has been transferred to the Federal Depository Insurance Corporation (FDIC). The Federal Reserve, the FDIC, and the United States Department of Financial Services issued a joint statement. Adrianne Harris said:
“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. 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.”
Efforts to Protect Depositors
In its announcement, the FDIC said that depositors’ money would be protected up to 250 thousand dollars and that their money would not be frozen. FDIC said:
“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. Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
Coinbase Affected
With the closure of Signature Bank, it was revealed that Coinbase had $240 million in cash at Signature. Coinbase will use other bank partners for customer transactions. With this news, it seems that USDC will be the most affected by the collapse of 3 banks. As you know, USDC provider Circle held $3.3 billion in Silicon Valley Bank. Coinbase is one of the USDC co-founders, and it was affected by the Signature Bank collapse.
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