The crypto-friendly bank, Signature Bank New York, became the third United States bank institution to close up shop in a shocking record period of just four days. Experts believe its collapse will have the biggest impact on the digital currency market among all troubled banks because of its close relationship with leading crypto firms in the industry.

Regulators and governments around the world are mulling over the collapse of the banks including Silicon Valley Bank (SVB) and crypto-focused Silvergate Bank. At the moment, there are more questions than answers, especially with the implosion of FTX exchange still fresh in the investors’ minds.

US Regulators Draw The Curtains On Signature Bank New York

A joint statement from US agencies comprising of the Federal Reserve (Fed), the Treasury, and Federal Deposit Insurance Corporation (FDIC) said that they had unanimously agreed to temporarily close Signature Bank in a move meant “to protect depositors.”

The bank was shut down with immediate effect and put under FDIC receivership. Nevertheless, panic is still reverberating across the world because the FDIC only covers up to $250,000 – a figure that is significantly low for corporate clients.

In the interim, the three regulators have replaced the top management at Signature Bank. Crypto firms with exposure to Signature Bank and Silicon Valley Bank, while respecting a public outcry on Twitter, declared exposure summing up to millions in US dollars.

Coinbase, Paxos, and Celsius Announce Exposure to Signature Bank

Paxos, a stablecoin issuer, was the first to take to Twitter and declare a $250 million exposure to Signature Bank. The crypto firm assured investors they did not need to worry because “the government has taken extraordinary measures to protect customers and announced all customer deposits at Signature Bank will be fully guaranteed and expect to be made available to customers on Monday.”

Paxos reckoned that it “holds private deposit insurance well in excess of our cash balance and FDIC insurance per-account limits.” The stablecoin issuer added that it remains committed to protecting customer funds and having private deposit insurance as a priority.

Last week Paxos said it had no exposure to Silicon Valley Bank, which is the second most fatal collapse of a financial institution in US history.

Coinbase, the largest cryptocurrency exchange in the US has admitted to having corporate cash exposure to the fallen Signature Bank of approximately $240 million. The crypto exchange said it expects “to fully recover these funds.”

On Saturday, Coinbase announced a temporary suspension on USDC conversions on its platforms, following news of Circle, the stablecoin’s issuer having an approximately $3 billion exposure to SVB.

USDC suffered a massive blow as investors went on a selling spree, afraid of a repeat of the TerraUSD (UST) crash in May 2022. The world’s second largest stablecoin depegged from the dollar, dropping 10% in less than 24 hours to $0.87.

“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow the guidance provided by state and Federal regulators,” Circle said via Twitter.

At the time of writing, USDC had regained its dollar peg and trading at $0.99 per token following an assurance from Circle of recovering “any shortfall,” caused by the contagion bolstered by actions taken by regulators to protect investor deposits.

It is worth mentioning that Creditcoin, a credit bureau that operates in a decentralized manner, stated that it did not have any connection or involvement with Signature Bank or Silicon Valley Bank.

Intriguingly, the largest crypto exchange by daily traded volume, Binance has not communicated regarding exposure to Signature Bank despite the company having recently disclosed it had a working relationship with the bank.

At the time, Binance issued a warning to its customers that it was not going to be supporting SWIFT transfers of less than $100,000 and that only 0.01% of its user base was tapping the services of the bank.

“One of our fiat banking partners, Signature Bank, has advised that it will no longer support any of its crypto exchange customers with buying and selling amounts of less than 100,000 USD as of February 1st, 2023,” a Binance spokesperson said in a statement sent to Decrypt at the time.

“As a result, some individual users may not be able to use SWIFT bank transfers to buy or sell crypto with/for USD for amounts less than 100,000 USD, ” the spokesperson added.

US Regulatory Agencies Show Readiness To Take Action

The sudden closure of Signature Bank comes after US state agencies vowed to protect the economy and people by taking “decisive actions” that would continue to preserve confidence in the banking sector.

Silicon Valley Bank’s clients will be able to fully access their deposits on Monday, according to statements by the Fed, U.S. Treasury, and FDIC. To alleviate stress in the financial system, the Federal Reserve Board will extend loans to banks that can be secured with high-quality assets such as U.S. Treasuries.

Ripple’s Exposure To Silicon Valley Bank

The collapse of Silicon Valley Bank posed a serious threat to many technology startups, and several cryptocurrency companies, such as Ripple, BlockFi, Pantera, and Avalanche, also reported being impacted by the bank’s failure.

On Sunday, the CEO of Ripple, Brad Garlinghouse told the community that the blockchain startup “had some exposure to SVB.” Silicon Valley Bank was Ripple’s banking partner with a cash balance.

Garlinghouse assured the community it should not expect any disruptions in the day-to-day running of the business and that Ripple “remains in a strong financial position.”

Some firms have maintained that they had no exposure to any of the fallen banks, including and the issuer of the largest stablecoin Tether (USDT). Statements from both firms indicate no exposure to Silvergate Bank or Silicon Valley Bank.

Signature Bank Chicago, said it has no affiliations with the New York Based Signature Bank, and therefore it has suffered no “cryptocurrency exposure.” The latter took time to explain that ABC News had incorrectly used the bank’s logo while referring to Signature Bank New York.

“There’s no affiliation between the two organizations and our Signature Bank is stronger than ever and has no cryptocurrency exposure, Signature Bank Chicago clarified.

The list of exposures to Silicon Valley Bank and Signature Bank New York is expected to keep growing this week as companies take action to protect their customers.

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