<p>Signature Bank became the third US bank institution to collapse in the span of four days. Similar to the now-collapsed Silvergate Bank, it also had a large corporate customer base from the cryptocurrency industry. The other one, <a href=”https://www.financemagnates.com/cryptocurrency/svb-crisis-circle-escapes-usdc-depeg-with-regulatory-assurance/” target=”_blank” rel=”follow”>Silicon Valley Bank </a>(SVB), mostly tapped the technology sector, including crypto firms.</p><p>Signature Bank Collapses</p><p>
New York state regulator, the Department of Financial Services, shuttered Signature Bank on Sunday “to protect depositors,” putting it under the Federal Deposit Insurance Corporation (FDIC) receivership.
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The FIDC also took control of the SVB, but <a href=”https://www.financemagnates.com/cryptocurrency/silvergate-bank-announces-voluntary-liquidation-amid-troubles/” target=”_blank” rel=”follow”>Silvergate Bank</a> declared voluntary liquidation and did not seek the FIDC receivership. Though FIDC protects banking deposits, it only covers up to $250,000. This limit falls significantly short when it comes to corporate clients.
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According to the New York Department of Financial Services (DFS), Signature Bank had total assets of about $110.36 billion and total deposits of around $88.59 billion by the end of 2022.
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The bank had nine business lines, including commercial real estate and digital assets banking. Almost a quarter of its savings came from the cryptocurrency industry in the quarter ending in September. However, crypto deposits shrunk to around $8 billion by the end of December.
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Though the US government was initially against bailing out the two banks, SVB and Signature, it announced the protection of all depositors of both banks on Sunday. As highlighted, the move is to “protect the US economy by strengthening public confidence in our banking system.”
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“We are also announcing a… 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… [and]… no losses will be borne by the taxpayer,” Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chairman Martin Gruenberg said in a joint statement.</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”><a href=”https://twitter.com/federalreserve?ref_src=twsrc%5Etfw”>@federalreserve</a> <a href=”https://twitter.com/USTreasury?ref_src=twsrc%5Etfw”>@USTreasury</a> <a href=”https://twitter.com/FDICgov?ref_src=twsrc%5Etfw”>@FDICgov</a> issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors’ savings remain safe: <a href=”https://t.co/YISeTdFPrO”>https://t.co/YISeTdFPrO</a></p>— Federal Reserve (@federalreserve) <a href=”https://twitter.com/federalreserve/status/1635043996321067008?ref_src=twsrc%5Etfw”>March 12, 2023</a></blockquote><p>
Crypto Companies’ Exposure to Signature Bank
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Meanwhile, many major cryptocurrency companies voluntarily disclose their exposure to Signature Bank. It includes Coinbase, Paxos, and now-bankrupt Celsius. However, many crypto firms also denied any exposure to the collapsed bank.
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Paxos Has $250 million Exposure to Signature Bank </p><p><a href=”https://www.financemagnates.com/cryptocurrency/stablecoin-issuer-paxos-faces-nydfs-probe/” target=”_blank” rel=”follow”>Stablecoin issuer Paxos</a> has $250 million in deposits with Signature Bank. The crypto company added that it held private insurance covering the deposits beyond the FIDC protection.
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“Seeking private deposit insurance is part of our conservative approach to managing customer assets exceeding FDIC insurance limits,” Paxos stated. “Paxos maintains relationships with multiple leading global banks and are always looking to expand our network of banking partners.”</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>Paxos currently holds $250M at Signature Bank and holds private deposit insurance well in excess of our cash balance and FDIC per-account limits. Seeking private deposit insurance is part of our conservative approach to managing customer assets exceeding FDIC insurance limits.</p>— Paxos (@PaxosGlobal) <a href=”https://twitter.com/PaxosGlobal/status/1635061959950495744?ref_src=twsrc%5Etfw”>March 12, 2023</a></blockquote><p>
$240 million Exposure of Coinbase </p><p>Coinbase, the largest cryptocurrency exchange in the US, revealed a $240 million deposit with Signature Bank. However, the exposure did not affect <a href=”https://www.financemagnates.com/cryptocurrency/coinbase-takes-a-stand-against-the-sec/” target=”_blank” rel=”follow”>Coinbase’s operations</a>, as the exchange currently processes transactions through other banking partners.
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“Despite the turbulence we have seen in the traditional banking sector recently, Coinbase continues to operate as usual. At Coinbase, all client funds continue to be safe and accessible, including USDC conversions which will resume on Monday,” Coinbase added.</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>All client cash at banks continues to be protected by FDIC pass-through insurance. Due to FDIC’s hold on Signature’s transactions, we’re currently facilitating all client cash transactions with other banking partners.</p>— Coinbase (@coinbase) <a href=”https://twitter.com/coinbase/status/1635066153348521984?ref_src=twsrc%5Etfw”>March 12, 2023</a></blockquote><p>
Meanwhile, with the turbulence in the banking industry, Coinbase stocks tanked more than 17 percent last week. However, the investors’ sentiment toward the crypto exchange exposure will be revealed when the US markets open on Monday.</p><p>More Troubles for Bankrupt Celsius</p><p>The Celsius Official Committee of Unsecured Creditors, a body that sees the interest of the depositors of now-bankrupt <a href=”https://www.financemagnates.com/cryptocurrency/news/crypto-lender-celsius-files-for-bankruptcy-in-new-york/” target=”_blank” rel=”follow”>crypto lending platform Celsius</a>, also revealed exposure to Signature Bank but did not disclose the amount.</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>Today the US government announced the closure of Signature Bank where Celsius held some of its funds. All depositors will be made whole, per US Gov. Celsius and the UCC are evaluating the situation and will provide further updates. Announcement here: <a href=”https://t.co/v5GSvTL7JY”>https://t.co/v5GSvTL7JY</a></p>— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) <a href=”https://twitter.com/CelsiusUcc/status/1635062812518260737?ref_src=twsrc%5Etfw”>March 12, 2023</a></blockquote><p>
Signature Bank ran Signet, a blockchain-based real-time payments system available around the clock, which was used by a large chunk of crypto companies, including Coinbase and Circle. Now, that infrastructure is not available anymore.
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Safe Crypto Companies</p><p>However, several crypto companies further came out clean with their exposure to Signature Bank. Circle, which has $3.3 billion of its stablecoin reserves deposited with SVB, has no exposure to Signature Bank. Crypto.com and Tethe also confirmed that they do not hold any deposits or have any lending exposure with the collapsed New York bank.</p><blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”><a href=”https://t.co/pFc4Pz9nFR”>https://t.co/pFc4Pz9nFR</a> has $0 exposure to Signature Bank. <a href=”https://t.co/TG2h7HyXE9″>https://t.co/TG2h7HyXE9</a></p>— Kris | Crypto.com (@kris) <a href=”https://twitter.com/kris/status/1635072945923162112?ref_src=twsrc%5Etfw”>March 13, 2023</a></blockquote>
This article was written by Arnab Shome at www.financemagnates.com.
