Signature Bank, a New York-based bank with numerous cryptocurrency customers, has been closed by state regulators, causing yet another setback for digital assets in the banking industry. The closure follows similar actions taken against Silvergate Capital and Silicon Valley Bank, both previously regarded as crypto-friendly institutions.
Despite beginning a pull-back from digital assets after the FTX exchange collapse, Signature still held $16.5 billion in crypto-related deposits. Coinbase, the US’s largest crypto exchange, and Paxos Global have both been impacted, with Coinbase holding a balance of $240 million at the bank and Paxos Global holding $250 million.
Crypto Banking Woes
As the US’s most crypto-friendly financial institutions begin to turn their backs on digital assets, the industry is becoming more cut off from the banking system, with 24/7 fast payment rails being particularly affected. Austin Campbell, an adjunct professor at Columbia Business School, believes the only solution for crypto is to look to other jurisdictions going forward. Circle Internet Financial, the issuer of the USDC stablecoin, has said it has $3.3 billion at Silicon Valley Bank and maintains transaction and settlement accounts for USDC at Signature.
Also Read: Galois Capital Shuts Down After Losing Half Its Assets on FTX Exchange
Fast Payment Network Impact
Signature Bank operated Signet, a fast payment network that allowed commercial crypto clients to make real-time payments in dollars at any time, seven days a week. After the collapse of Silvergate’s SEN network in early March, Signet became the only viable option for many crypto customers looking to make rapid payments to exchanges and vendors, or to meet payroll. Should Signet go out of commission, users could experience significant issues when attempting to get in and out of exchanges, affecting crypto-market liquidity.
The US government has moved to protect depositors’ funds following the collapse of Silicon Valley Bank and set up a new financial backstop, improving investor sentiment. Hence, the prices of major digital assets increased on Monday, including Bitcoin, which rose by around 5% to $22,530.
