Reading Time: 2 minutes
- Several crypto firms including Coinbase, Celsius, and Paxos have had their funds frozen by regulators closing down Signature Bank
- Signature Bank was closed down by U.S. regulators due to a “systemic risk” posed by its financial position
- All customers, including the crypto firms, will be made whole thanks to safeguards
Several crypto firms including Coinbase, Celsius, and Paxos have had their funds frozen by regulators closing down Signature Bank, which has been shuttered in conjunction with the United States Federal Deposit Insurance Corporation (FDIC). The regulator claims that the bank posed a “systemic risk” and that its closure was necessary to protect the US economy, which has left multiple crypto companies seeking assurances that they will get their funds back.
Two Banks Posed “Systemic Risk” to Financial System
The Department of the Treasury, Federal Reserve, and FDIC put out a joint statement on Saturday regarding both Silicon Valley Bank and Signature Bank in which it said that the financial situation of both entities posed risks to the U.S. financial sector, and that it was taking swift action to protect customers. Both banks have been shut down by regulators, with the statement seeking to reassure U.S. citizens that all was nevertheless well:
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
Crypto Firms Confirm and Deny Exposure
In response to the closure, Coinbase tweeted yesterday that it held approximately $240 million in corporate funds at Signature Bank, but it expects that the funds will be fully recovered:
As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs
— Coinbase (@coinbase) March 12, 2023
Paxos, which was recently told to stop minting BUSD tokens by New York regulators, said it had an equal amount held in Signature Bank:
The government has taken extraordinary measures to protect customers and announced all customer deposits at Signature Bank will be fully guaranteed and expect to be made available to customers on Monday.
— Paxos (@PaxosGlobal) March 12, 2023
Next up was Celsius, which the company said held “some” funds in Signature Bank:
As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs
— Coinbase (@coinbase) March 12, 2023
Other firms, such as Crypto.com, were keen to stress that they had no exposure to Signature Bank in order to prevent any FUD, although given that all funds would be covered by FDIC, any scares would have been temporary.
Read More
In the last pages of 2020, multiple prominent businesses from the crypto industry unveiled their recent exposure to Signature Bank, a New York-based financial institution.
Ripple, Notable, and BitGo disclosed that they have all recently established relationships with Signature Bank – an FDIC-insured financial institution.
Signature Bank is a leading community bank that operates exclusively in the State of New York. It was founded in 2001 and is a Well Fargo competitor in the New York market, playing an important role in the state’s banking system.
Ripple is the first major crypto organization to announce its collaboration with Signature Bank. Ripple revealed that it had received an account with Signature Bank in order to better facilitate global payments. This is a significant development for both organizations, as it means that Ripple can now access a direct banking relationship which could reduce its dependence on intermediaries and streamline payment settlement.
BitGo also revealed that it had partnered with Signature Bank for its treasury needs. BitGo is a Blockchain security company that provides digital asset custody services to large institutional investors across the globe. This new agreement will allow BitGo to securely store its digital assets in an FDIC-insured bank account.
Lastly, Notable announced that it has partnered with Signature Bank for its global corporate banking needs. Notable is a blockchain technology company that provides financial products and services on the blockchain. The company said that its new partnership with Signature Bank will help it use traditional banking infrastructure to expand its services.
Overall, these collaborations are a strong indication of the growing acceptance of crypto firms in the traditional banking space. By establishing partnerships with a major New York-based financial institution, these companies are taking a major step towards becoming part of the mainstream financial infrastructure. It remains to be seen whether other traditional banking institutions will follow the footsteps of Signature Bank.
