Coinbase announced that it had about $240 million in corporate funds at Signature Bank, but expects a full recovery of all its funds.
Several crypto firms, including Paxos, have disclosed their level of involvement with Signature Bank after the latter’s closure by the Treasury.
Following an unusual week that saw multiple banks fail, the Federal Reserve, Treasury, and FDC agreed to close Signature Bank. The decision was jointly taken to prevent further depositor outflow and forestall any further financial crisis.
According to a statement by the NYFDS, Signature bank constituted a systemic risk. Hence, it was closed to protect the US economy and safeguard depositor funds. As the appointed receiver, the FDIC has transferred all funds and assets of the Signature Bank to the Signature Bridge Bank. Consequently, depositors will be able to receive any funds they have in the bank.
As of December, Signature Bank had a total deposit of $82.6 billion. Following the announcement, Paxos announced that it held $250 million at the bank. However, the firm assured customers that the funds would be recovered due to the protective measures taken by the government.
Likewise, Paxos added that it possessed additional insurance coverage for amounts exceeding the standard FDIC insurance. Similarly, Coinbase announced that it had about $240 million in corporate funds at Signature Bank, but expects a full recovery of all its funds. A body representing now-defunct creditors of Celsius (Celsius Official Committee of Unsecured Creditors) also noted that some of its funds were held with Signature Bank.
Other companies like Immutable X, Theta Network, Crypto.com, and Tether were quick to note their non-exposure to the bank because of its closure.
Effect of Signature Bank Closure on the Crypto Ecosystem
Following the bank closure, BUSD, Circle and DAI lost their dollar peg over the weekend. Additionally, Circle could not process its minting and redemption program. The firm is transferring its funds to BNY Mellon and will continue to make settlements through them.
Interestingly, Bitcoin and Ether rallied by almost 10% after the Federal Government announced it was intervening. The government also announced a $25 billion program to help banks cope with shortfalls of liquidity during turbulent periods. Historically, such moves have always helped cryptocurrencies and other speculative asset classes. It doesn’t look like the effect will be different this time around.
An experienced writer with practical experience in the fintech industry. When not writing, he spends his time reading, researching or teaching.