Another crypto-friendly bank collapse and what it means for crypto.
In this article, we will discuss how and why Signature Bank collapsed, and the impact on the crypto industry.
Signature Bank: A Brief History
Signature Bank, a full-service New York commercial bank, was known for its convenient service and deep connection with the real estate and legal sectors. With 40 private client offices across five U.S. states, the banking institution had nine national business lines, including venture banking, mortgage servicing and commercial real estate.
On March 12, 2023, the New York State Department of Financial Services shut down the bank following two days of turmoil after Silicon Valley Bank imploded – making it one of the most significant financial collapses in U.S. history.
Why Was Signature Bank Seized?
To put it shortly, Signature Bank faced the repercussions of Silicon Valley Bank’s collapse and subsequent seizure by regulators on Friday last week.
A flurry of withdrawals, over $10 billion, began to happen. Despite this, outflows slowed down by Sunday morning.
The good news, however, is that all depositors of Signature Bank will be fully bailed out:
"We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer."
Impact on Crypto
Both Signature Bank and Silvergate Bank had launched Signature's Signet network and Silvergate Exchange Network (SEN) to improve the transactions of digital assets between crypto platforms and their banks. Coinbase, Circle and other crypto companies incorporated Signet and SEN to assist institutional customers in transferring, managing and settling accounts.
However, after the collapse of these banks in quick succession, analysts have cited it as a huge setback for cryptocurrency infrastructure, likely resulting in reduced liquidity within the U.S.
Some in the crypto space believe the seizure was part of a wider move by regulators to shut down crypto in the United States.
Nic Carter posits that Signature Bank was closed by regulators in a deliberate and calculated move:
Further, the unrealized losses on Signature Bank’s securities portfolio was not as severe as SVB’s.
After the news of Signature Bank's collapse surfaced, crypto investors took to Twitter to express their frustration as yet another ‘crypto-friendly’ bank went down in less than a week.