Yet another crypto-friendly bank has been forced to shut its doors: Signature Bank – the bank numerous crypto firms retreated to after Silvergate revealed operational difficulties earlier this month.
As with Silicon Valley Bank (SVB), the U.S. government has agreed to fully bail out the firm’s depositors as part of a “systemic risk exception.”
In a joint statement from the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation, the parties clarified that no losses associated with the bank would be borne by taxpayers – just like SVB.
“Shareholders and certain unsecured debtholders will not be protected,” read the statement. “Senior management has also been removed.”
The Fed said that the measures taken are to strengthen public confidence in the banking system and ensure it can continue serving its vital role in the economy.
According to the Financial Times, Signature Bank’s managers were surprised to see their bank placed into receivership. The firm faced a swell of outflows alongside a major stock selloff on Friday due to panic surrounding SVB, but the former had reportedly stabilized by Sunday.
Signature Bank was Coinbase’s bank of choice when Silvergate began showing signs of financial trouble, as with LedgerX.
Contrarily, Kraken distanced itself from Signature earlier this month when it stopped processing transactions for non-corporate clients through the bank.
Circle – the issuer of the second largest stablecoin, USDC – had exposure to Silvergate, Signature, and SVB as of January, according to its January audit.
The firm managed to rescue its Silvergate reserves before the bank entered voluntary liquidation 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.
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