On March 12, New York regulators and the US Federal Deposit Insurance Corporation shut down Signature Bank, a cryptocurrency-friendly bank that had reportedly become a systemic risk to the US economy. As news of the shutdown spread, several crypto firms reported having funds tied up with the bank.
Coinbase, one of the world’s largest cryptocurrency exchanges, announced via Twitter that it had around $240 million in corporate funds in Signature Bank that it expected to fully recover. Stablecoin issuer and crypto company Paxos also reported that it had $250 million in the bank, but noted that it had private insurance covering the amount not covered by the FDIC’s standard insurance of $250,000 per depositor.
Celsius, a crypto lender that recently filed for bankruptcy, reported that Signature Bank had withheld some of its funds, but did not disclose the amount. However, Celsius’ Official Committee of Unsecured Creditors, which represents the interests of account holders, added that “all depositors will be compensated.”
As news of the cryptocurrency-related exposure and shutdown spread, other companies in the cryptocurrency industry stepped forward to allay fears about their related exposures. Robbie Ferguson, co-founder of Web3 Immutable X game development platform, and Mitch Liu, co-founder of media-focused blockchain Theta Network, separately tweeted that their respective companies had no exposure to Signature.
Crypto.com also reported in a tweet from CEO Kris Marszalek that he had no funds in the bank. Similarly, Paolo Ardoino, CTO of stablecoin firm Tether, tweeted that Tether had no exposure to Signature Bank.
While some companies hope to recover their funds in full, the closure of Signature Bank has raised concerns about the risks associated with the crypto industry. In addition to the closure of Signature Bank, the Federal Reserve announced that the FDIC had been approved to take action to protect depositors at Silicon Valley Bank, a bank focused on technology startups that had experienced liquidity problems due to a bank run that spread the contagion. to the cryptocurrency sector. The Fed also announced a $25 billion program to ensure ample liquidity for banks to meet the needs of their customers in times of turbulence.
Overall, Signature Bank’s closure highlights the challenges and risks associated with the fast-growing and often unpredictable crypto industry. While some companies may recover their funds, others may face significant losses, underscoring the need for greater regulatory oversight and risk management in the sector.
