The recent shutdown of Signature Bank, a crypto-friendly bank based in New York, has raised concerns among crypto firms that had funds tied up with the bank. On March 12, the bank was shut down by New York regulators and the United States Federal Deposit Insurance Corporation due to its reportedly becoming a systemic risk to the US economy. Following the shutdown, several crypto firms announced that they had funds held at the bank.
Coinbase, one of the world’s largest crypto exchanges, reported that it had roughly $240 million in corporate funds at Signature Bank, which it expects to recover in full. Meanwhile, Paxos, a stablecoin issuer and crypto firm, reported that it had $250 million held at the bank, but noted that it held private insurance that covered the amount not covered by the standard FDIC insurance of $250,000 per depositor.
Celsius, a crypto lender that recently filed for bankruptcy, also reported that Signature Bank had held some of its funds, but did not disclose the amount. However, the Celsius Official Committee of Unsecured Creditors assured that all depositors would be made whole.
As the news spread, other crypto firms came forward to quell fears about their related exposures. Immutable X and Theta Network both tweeted that their companies had no exposure to Signature. Similarly, Crypto.com reported that it had no funds in the bank, and Tether’s CTO confirmed that Tether had no exposure to Signature Bank.
While some firms expect to recover their funds in full, the closure of Signature Bank highlights the risks associated with the crypto industry. This closure, along with the FDIC’s actions to protect depositors at Silicon Valley Bank, have raised concerns about the sector’s stability. In response, the Federal Reserve has announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.
The closure of Signature Bank underscores the need for greater regulatory oversight and risk management in the crypto industry. As the sector continues to grow rapidly and unpredictably, it is imperative that firms take steps to mitigate risks and ensure the safety of their funds.