In the wake of the banking meltdown, regulators have shut down yet another crypto-friendly bank – Signature Bank, based in New York – delivering a significant blow to the crypto industry.
On Sunday, March 12, state regulators pulled the plug on Signature Bank, marking it as the third largest failure in U.S. banking history, just two days after Silicon Valley Bank’s failure left billions of dollars in deposits unclaimed.
Signature and Silicon Valley Bank were both proponents of digital asset liquidity, facilitating swift payments between clients, exchanges, and hedge funds. As news of Silicon Valley Bank’s struggles circulated last week, Signature’s anxious business clients began to inquire about the security of their deposits.
With the majority of depositors being business customers of Silicon Valley Bank, many of them had more than $250,000 in their accounts, causing concerns about the safety of their deposits. However, the U.S. Federal Deposit Insurance Corporation (FDIC), which seized SVB, covers deposits up to $250,000 maximum.
According to the New York Department of Financial Services, Signature Bank, which had $110 billion in assets and nearly $89 billion in deposits at the end of 2022, was taken over by the FDIC. On Friday, Signature had a market value of $4.4 billion, and the company’s shares fell more than 20% on the same day and 76% over the past year.
The closure of Signature Bank and Silicon Valley Bank could have a severe impact on the crypto market’s liquidity. Signature operated a payment network called Signet that enabled its crypto clients to make real-time dollar payments round the clock. Major companies like Coinbase joined Signet in October to enable instantaneous fund transfers for their institutional clients.
With Signet going up in smoke, the ability of users to move funds into and out of exchanges quickly will be hampered, resulting in a profound impact on the crypto market’s liquidity.
The US Treasury Department and other bank authorities have issued a joint press release stating that all depositors of Signature Bank and Silicon Valley Bank will receive a full refund, and “no losses will be borne by the taxpayer.”
