Signature Bank, a New York-based lender with a significant number of crypto clients, has closed down, marking another setback for the digital assets industry. The bank's closure was announced by the US Treasury Department, following action by New York state financial regulators. Depositors will have access to their funds from Monday, reports Bloomberg.
Signature Bank's closure comes after similar actions against Silvergate Capital Corp. and Silicon Valley Bank, both of which were also considered among the most crypto-friendly banks in the US. These institutions not only stored crypto company funds but also facilitated fast payments between clients, including hedge funds and exchanges. Such transactions played a crucial role in maintaining liquidity in the digital-asset markets.
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Signet Takes A Hit
Although Signature Bank had begun a pullback from the crypto industry, it remained an important player, with $16.5 billion in crypto-related client deposits as of March 8. The bank also operated Signet, a payment network that enabled commercial crypto clients to make real-time payments in dollars, seven days a week.
Following the recent shutdown of Silvergate's SEN network, Signet was the only option for many crypto clients seeking to make fast payments to exchanges and vendors or meet payroll. Crypto derivatives platform LedgerX had previously instructed clients to send domestic wire transfers to Signature instead of Silvergate.
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Circle Internet Financial Ltd., the issuer of the USDC stablecoin, had $3.3 billion at Silicon Valley Bank and held transaction and settlement accounts for USDC at Signature. Coinbase Global Inc., the largest crypto exchange in the US, integrated Signet to allow clients to transfer funds instantaneously last October. In 2021, stablecoin TrueUSD integrated with Signet for instant settlements, and Signet also integrated with Fireblocks in 2020.
With Signet now out of commission, users may face difficulties in quickly moving funds in and out of exchanges, causing a significant impact on crypto-market liquidity. The ease of trade for Bitcoin-to-dollar and Bitcoin-to-Tether transactions on some US exchanges have already dropped between 35 percent and 45 percent from the beginning of March to Saturday, according to research firm Kaiko. The closure of Signature Bank is likely to exacerbate this situation.
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