On March 12, New York regulators and the United States Federal Deposit Insurance Corporation shut down Signature Bank, a crypto-friendly bank that had reportedly become a systemic risk to the US economy. As news of the shutdown spread, several crypto firms came forward to report that they had funds tied up with the bank.
Coinbase, one of the largest crypto exchanges in the world, announced via Twitter that it had around $240 million in corporate funds at Signature Bank that it expected to be fully recovered. Stablecoin issuer and crypto firm Paxos also 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, reported that Signature Bank had held some of its funds, but did not disclose the amount. However, the Celsius Official Committee of Unsecured Creditors, which represents the interests of account holders, added that “all depositors will be made whole.”
As news of the shutdown and related crypto exposure spread, other firms in the crypto industry came forward to quell fears about their related exposures. Robbie Ferguson, co-founder of Web3 game development platform Immutable X, and Mitch Liu, co-founder of the media-focused Theta Network blockchain, both separately tweeted that their respective companies had no exposure to Signature.
Crypto.com also reported in a tweet by CEO Kris Marszalek that it had no funds in the bank. Similarly, Paolo Ardoino, the chief technology officer of stablecoin firm Tether, tweeted that Tether had no exposure to Signature Bank.
While some firms expect 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 shutdown of Signature Bank, the Federal Reserve announced that the FDIC had been approved to take actions to protect depositors at Silicon Valley Bank, a tech-startup-focused bank that had experienced liquidity issues due to a bank run that spread contagion to the crypto sector. The Fed also announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.
Overall, the closure of Signature Bank highlights the challenges and risks associated with the rapidly growing and often unpredictable crypto industry. While some firms may be able to recover their funds, others may face significant losses, underscoring the need for greater regulatory oversight and risk management in the sector.
