Another crypto-friendly bank has been forced to close its doors: Signature Bank, the bank to which several crypto businesses fled after Silvergate reported operational issues earlier this month. Similarly with Silicon Valley Bank (SVB), the US government has agreed to fully compensate depositors as part of a “systemic risk exemption.”
The Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation issued a joint statement clarifying that no losses related with the bank, like SVB, will be paid by taxpayers.
“Shareholders and certain unsecured debt holders will not be protected,” read the statement. “Senior management has also been removed.”
The Fed stated that the actions taken are intended to boost public trust in the financial sector and guarantee that it can continue to play an important role in the economy.
Signature Bank in a Mess
Signature Bank’s managers were taken aback when their bank was thrown into receivership, according to the Financial Times. The business experienced a surge in outflows amid a significant market selloff on Friday owing to SVB panic, but the latter had allegedly steadied by Sunday.
As Silvergate, like LedgerX, began to exhibit symptoms of financial difficulties, Coinbase’s bank of choice was Signature Bank. Kraken, on the other hand, cut ties with Signature earlier this month when it ceased processing transactions for non-corporate clients through the bank.
According to its January audit, Circle, the issuer of the second largest stablecoin, USDC, has exposure to Silvergate, Signature, and SVB. The company was able to save its Silvergate reserves before the bank went into voluntary insolvency on Thursday. However, it temporarily lost hold of $3.3 billion in cash within SVB on Friday, causing USDC to lose its peg.
USDC has since returned above $0.99 after Circle CEO Jeremy Allaire confirmed that all of the token’s reserves had been recovered, and will be transferred to BNY Melon.