The crypto world seems to not be doing so well as another bank has been closed following Silvergate's liquidation. New York regulators have now closed Signature Bank, which is another go-to for cryptocurrency exchanges.
The Signature bank logo is seen in this photo illustration in Warsaw, Poland on 13 March, 2023. Silvergate, the second largest bank catering to digital assets companies closed its doors this week in the wake of regulators shutting down Silicon Valley Bank and the crypto-friendly Signature bank losing significantly in value on the NASDAQ exchange.
Two More Banks Follow
Although the bank has been closed, all depositors of the institution will be made whole, according to a statement released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg.
It appears that shareholders and some of the unsecured debtholders will not be protected, and senior management has already been removed. Special assessments will be needed to recover losses to the Deposit Insurance Fund meant for uninsured depositors since it's required by law.
According to The Verge, the announcement was to reassure banking customers are protected above the $250,000 made certain by the FDIC, and that their money will not be frozen. It was mentioned the New York Department of Financial Services now possesses the bank.
By December 2022, Signature Bank had $88.59 billion in deposits, and it held $240 million worth of cash owned by Coinbase. Since the mentioned bank is closing, crypto exchange Coinvase will be using other banking partners for client transactions moving forward.
A recommendation from the boards of the FDIC and the Federal Reserve, as well as a consultation from President Joe Biden, prompted the Secretary of Treasury to enable FDIC to go through with Silicon Valley Bank's resolution.
The move proceeds in a way that will protect its depositors. They will be able to access all their money by Monday, March 13th. According to the statement released by the Federal Reserve System, losses brought by the bank's losses will not be "borne by the taxpayer."
The Federal Reserve Board announced that additional funding will be made available to eligible depository institutions, which will make sure that banks are capable of meeting the needs of their depositors.
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The First One to Fall
The first one to shut down its operations was the Silvergate Bank. It was announced by Silver Capital Corporation as they said they were "winding down" their operations. Silvergate believes that liquidation is the best path forward for the company and the bank.
The company is repaying all its customer's deposits. According to reports, the downfall of the bank can be tied to two of its biggest cryptocurrency exchange clients, which are FTX and Genesis. The company's earnings reports showed a $1 billion loss in just one quarter.
Chair of Senate Banking Committee Sherrod Brown expressed that the fall of Silvergate can be used as a cautionary instance for what could when a bank is over-reliant on a risky, volatile sector like cryptocurrencies."
The liquidation was the result of a domino effect that started with its customers withdrawing a total of $8.1 billion. It has also led to the corporation shutting down the Silvergate Exchange Network, which was used by crypto exchanges like Kraken, Coinbase, and Gemini.
