New York regulators have closed Signature Bank, one of the top two US destinations for cryptocurrency companies. This marks the third major bank to fall within a week, leading to concerns for investors. However, the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation issued a joint statement, reassuring customers that depositors of Signature Bank will be protected above the $250,000 guaranteed by the FDIC. As of December 31, 2022, Signature Bank had $88.59 billion in deposits. The New York Department of Financial Services has taken possession of the bank.
Signature Bank was widely used in the cryptocurrency space, with a network like that of Silvergate, which also collapsed on March 8th. Both banks allowed for the transfer of dollars in real-time, making it easier for crypto companies to trade. The loss of both banks may make it more difficult for these companies to convert back to dollars.
Cryptocurrency exchange Coinbase reportedly had $240 million in cash at Signature Bank. However, the hold on the bank’s funds has led Coinbase to use other banking partners for client transactions. Meanwhile, the regulators’ statement also indicated that depositors of Silicon Valley Bank, a non-crypto bank that failed on March 10th following a bank run, will have access to their uninsured deposits on Monday.
Depositors of Silicon Valley Bank will be made whole, according to the regulators. This is good news for cryptocurrency 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 is an important part of cryptocurrency payments. Circle will also be affected by Signature’s closing, and CEO Jeremy Allaire announced on Twitter that the company will use BNY Mellon instead. Finally, the regulators emphasized that no losses would be paid for by taxes in either case.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.