Signature Bank is one of the two largest US crypto lenders. As of December 31, 2022, the financial institution had $88.59 billion in deposits.
On March 13, regulators announced the closure of Signature Bank, noting that savers would have full access to deposits, a move similar to the one taken to bail out customers of Silicon Valley Bank, which funded tech startups before it went bankrupt on Friday.
Signature Bank is known as one of the main banks in the crypto industry – the largest after Silvergate, which announced self-liquidation last week. (The main reason for Silvergate’s closure is withdrawals by major clients such as FTX and Genesis, which also went bankrupt. In January, Silvergate’s earnings report showed the bank lost $1 billion after its clients withdrew $8.1 billion.)
As of December 31, Signature Bank had $110.4 billion in total assets and $88.6 in total deposits, according to securities filings. Last year it was the 30th largest bank in the US in terms of deposits.
Crypto exchange Coinbase says it held $240 million in cash in Signature, but due to holding funds, there will be use other banking partners for customer transactions.
As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs
— Coinbase (@coinbase) March 12, 2023
The closure of Signature also affects the stablecoin provider Circle (governs USDC, a token that should always be worth $1 and is an important part of cryptocurrency payments). Instead, it will use BNY Mellon, CEO Jeremy Aller said.
With the closure of Signature bank announced tonight, we will not be able to process minting and redemption through SigNet, we will be relying on settlements through BNY Mellon.
— Jeremy Allaire (@jerallaire) March 12, 2023
To stop losses and prevent a bigger crisis, the Fed and the US Treasury created an emergency program to secure all deposits at both Signature Bank and Silicon Valley Bank using the Federal Reserve’s emergency lending authority. The FDIC fund will cover the funds of depositors who are not insured due to the $250,000 maximum guaranteed deposits.
While depositors will have access to their money, both banks’ stock and bond holders will effectively “be wiped out,” a senior Treasury official told CNBC.
Signature was opened in 2001 as an alternative to large banks with no red tape. Since the financial crisis, the lender has grown rapidly and has become a favorite with investors. In 2018, Signature hired cryptocurrency bankers to expand beyond commercial real estate. Other banks were reluctant to take on crypto clients, which is why Signature became one of the leading banks in the crypto market. This focus and a special payment system for crypto companies helped the bank double its deposits in two years. At the start of 2022, about 27% of its deposits were held by digital asset clients.
Source: The Verge, CNBC
