New York authorities have ended operations of the Signature Bank, one of the major crypto sector banks. This event marks the third instance of a US bank failing within a week.
In a joint statement, Federal Deposit Insurance Corporation Chair, US Treasury Secretary, and Federal Reserve Board Chair purported that all Signature Bank customers would be reimbursed.
As of December last year, Signature Bank held 88.59 billion dollars. Although according to The Verge, the Department of Financial Services has now taken the Bank’s authority.
Coinbase, a prominent crypto exchange, held two hundred and forty million dollars at Signature Bank before its closure. On the day before Signature Bank’s closure, Coinbase had around two hundred and forty million dollars. However, according to the FDIC, Coinbase has stated that they expect to retrieve these assets. The crypto exchange confirmed this in a tweet.
Circle, the operator behind the USDC stablecoin, is also affected by the closure of the Bank. Jeremy Allaire, the CEO of Circle, confirmed in a tweet that the closure of the Bank would prevent them from utilizing SigNet to process redemption and minting. Instead, they will have to depend on payments via BNY Mellon.
Jeremy Allaire also mentioned in his tweet that they would collaborate with a new transaction banking partner with automated redemption and minting capabilities, which could be initiated as early as the next day. In addition, he noted the company’s commitment to establishing strong reserve operations and automated USDC payment.
In addition to the closure of Signature Bank, Circle is also impacted by the fall of Silicon Valley Bank, a non-crypto institute that caused panic in the tech sector when it fell last week. According to reports, Circle has around 3.3 billion dollars in SVB, which must be made inaccessible due to the Bank’s collapse.
Analysts’ Opinion
In an interview on Sunday, Barney Frank, an Ex-US politician and Representative, expressed his concerns that authorities and regulators failed to appropriately acknowledge cryptocurrency as an entity when it was launched in 2008.
Barney Frank expressed that crypto can develop instability in the financial infrastructure if it is not adequately governed, and he described it as a capable destabilizing instrument.
Barney Frank is notable for his involvement in establishing the Dodd-Frank Wall Street Consumer Protection and Reform Act, which aimed to lower the excessive threats associated with the economic environment and avoid another worldwide financial crisis.
Barney Frank’s recent statement is influenced by the latest collapse of three large financial institutions. This month, Adrienne A. Harris, the New York Department of Financial Services superintendent, disclosed that the NYDFS had taken authority of Signature Bank, located in New York.
It is worth mentioning that the shutdown of Signature Bank occurred after the fall of its crypto counterpart, Silvergate Capital, and the closure of Silicon Valley Bank.
Barney Frank also acknowledged that things have changed over time, and the financial infrastructure is less vulnerable to threats this year than in 2008. He noted that while the crypto space substantially affects the banking ecosystem, the two are not mutually destructive. He stated that while there have been some unfortunate negative risks, they do not pose systemic challenges.
As a board member of Signature Bank, Barney Frank reiterated that the Bank’s users may have overestimated the institution’s exposure to the crypto space.