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After Silvergate and SVB, Crypto-Friendly Signature Bank Collapses

US Regulators close major crypto banks following Silvergate Capital and Silicon Valley Bank

Signature Bank, one of the two major banks for the crypto industry, has also been closed down by New York regulators, making it the third US bank failure in a week. All Signature Bank depositors “will be made whole,” said US Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg in a joint statement.

Signature Bank had US$88.59 billion in deposits as of December 31, 2022, and the bank had been taken over by the New York Department of Financial Services, according to the verge. Coinbase, the leading cryptocurrency exchange, had US$240 million in cash at Signature Bank.

“As of the close of business Friday, March 10, Coinbase had an approximately US$240m balance in corporate cash at Signature. “We expect to fully recover these funds, as initiated by the FDIC,” the crypto exchange said in a tweet. Circle, the company behind the USDC stablecoin, is also impacted by the closure of Signature Bank.

Its CEO Jeremy Allaire said in a tweet that with the closure of Signature Bank, “we will not be able to process minting and redemption through SigNet, we will be relying on settlements through BNY Mellon”. “Additionally, we will be bringing on a new transaction banking partner with automated minting and redemption potentially as soon as tomorrow. “We are committed to establishing strong and automated USDC settlement and reserve operations,” he added. Circle also has US$3.3 billion stashed at Silicon Valley Bank (SVB), a non-crypto bank that failed last week, causing panic in the tech industry. BlockFi, the bankrupt cryptocurrency lender, also has US$227 million in funds at SVB.

Following the collapse of SVB, top cryptocurrency exchanges Binance and Coinbase have also temporarily suspended USDC stablecoin conversions. Silvergate Capital, another US traditional bank, announced last week that it was “winding down operations and voluntarily liquidating” its bank division. The collapse of Silvergate Capital, a lender of choice to startups and tech firms, is the result of the collapse of cryptocurrency exchange FTX and an overall meltdown in the global crypto market. The Federal Reserve Board has now announced that it will provide additional funding to eligible depository institutions to ensure that banks can meet the needs of all their depositors. The regulators have stated that SVB depositors will be able to access their uninsured deposits on Monday (US time) and that no losses will be covered by taxes.