Signature Bank, one of the two big US destinations for crypto companies, has been closed by New York regulators. “All depositors of this institution will be made whole,” the Treasury, Federal Reserve and Federal Deposit Insurance Corporation said in a joint statement.
This is the third major bank that has fallen in the space of a week, and investors are spooked. The joint announcement that depositors will be protected above the $250,000 guaranteed by the FDIC appears to be meant to reassure banking customers that their money will not be frozen. Signature had $88.59 billion in deposits as of December 31, 2022. The New York Department of Financial Services has taken possession of the bank.
Signature was one of two banks that was widely used in cryptocurrency. Like Silvergate, which collapsed on March 8th, Signature had a network that let crypto companies transfer dollars in real-time. With both crypto banks gone, it may be harder to get back into dollars.
Crypto exchange Coinbase had $240 million in cash at Signature, the company said on Twitter. But because of the hold on the Signature funds, Coinbase will use other banking partners for client transactions.
Additionally, the Fed’s announcement said that depositors at Silicon Valley Bank will also be made whole. That’s good news for crypto — since stablecoin provider Circle was keeping $3.3 billion of its reserves there. Circle operates USDC, a token that is always meant to be worth $1 — and an important part of crypto payments.
Circle is affected by Signature’s closing, too. It will use BNY Mellon instead, said CEO Jeremy Allaire in a tweet.
Also in the statement, the regulators said that depositors of Silicon Valley Bank, a non-crypto bank that failed on March 10 following a bank run, will have access to their uninsured deposits on Monday. The statement noted that in both cases, no losses would be paid for by taxes.
Update March 12th at 8:02PM: Adds Coinbase statement, Circle statement.