New York regulators have closed down Signature Bank, which was one of the primary banking options for cryptocurrency firms in the US. This is the third significant bank to fail within a week, causing concern among investors. However, the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation have issued a collaborative statement, promising that all depositors will receive compensation, and assuring customers that their funds will not be seized. This is good news for the cryptocurrency industry, as depositors at Silicon Valley Bank will also receive full compensation.
Signature Bank held $88.59 billion in deposits as of December 31, 2022, and was among the top two banking options frequently utilized by cryptocurrency firms. It had a system that allowed crypto companies to transfer dollars instantly, similar to Silvergate, which also failed on March 8th. With both of these crypto banks gone, the process of converting cryptocurrency to dollars could become more challenging.
According to a Twitter post by Coinbase, the crypto exchange had $240 million in cash held at Signature Bank. However, due to the suspension of Signature’s funds, Coinbase will collaborate with alternative banking partners for its clients’ transactions. Meanwhile, Circle, which manages USDC, a token that is always valued at $1 and plays a crucial role in cryptocurrency payments, had placed $3.3 billion of its reserves at Silicon Valley Bank. Circle has also been impacted by Signature Bank’s closure and will shift to BNY Mellon to compensate for this loss.
The Federal Reserve’s announcement specified that depositors at Silicon Valley Bank would receive full compensation. This is good news for the cryptocurrency industry, as stablecoin provider Circle had placed $3.3 billion of its reserves at Silicon Valley Bank. Circle manages USDC, a token that is always valued at $1 and plays a crucial role in cryptocurrency payments.
The regulatory bodies have stated in the announcement that depositors of Silicon Valley Bank, a non-cryptocurrency bank that collapsed on March 10 due to a bank run, would be able to access their uninsured deposits on Monday. The statement highlighted that in both instances, taxpayers would not be responsible for any losses.
In summary, the closure of Signature Bank, one of the primary US banking options for cryptocurrency firms, has caused unease among investors. However, the regulatory bodies have issued a collaborative statement, promising that all depositors will receive compensation, and assuring customers that their funds will not be seized. Depositers at Silicon Valley Bank will also receive full compensation, which is good news for the cryptocurrency industry. The closure of both Signature Bank and Silicon Valley Bank will impact the process of converting cryptocurrency to dollars, but crypto exchanges like Coinbase and Circle will collaborate with alternative banking partners to continue transactions for their clients.