Signature Bank now serves more crypto companies in the wake of the Silvergate crisis
Signature Bank, one of the few federally regulated US banks that has actively courted digital assets, is said to be one of the few banks left with news that its competitor, Silvergate, is facing significant stress over its exposure to FTX and its allegations. was responsible for the commingling of the stock exchange and Alameda investment funds.
In December 2022, Financial Times wrote that Signature planned to offload up to $10 billion in deposits related to the cryptocurrency industry. The move marked a turnaround for a bank that achieved rapid growth by aggressively pursuing digital asset clients amid broader crypto industry turmoil following falling token prices and the bankruptcy of the FTX exchange, a Signatures client. The New York-based bank’s shares have fallen more than 50% since the start of 2021, after being the best-performing stock in last year’s KBW Bank index.
Signature Bank’s Chief Operating Officer, Eric Howell, explained to the FT last December that the bank wanted to reduce the share of crypto-related deposits to less than 15% of total deposits from the current 23%, “we are not just a crypto bank and we want that must appear loud and clear.”
Silvergate’s problems lead to customers at Signature
It was more than three months ago. Signature is now, as a result of Silvergate’s problems, one of the few remaining banks still able to process transactions for a number of crypto companies that need it.
On March 2, Yahoo Finance reported that LedgerX began diverting customers to Signature. In an effort to distance itself from Silvergate Bank, LedgerX has chosen to switch to Signature Bank as its new domestic wire transfer recipient, rumors that were reported by both Yahoo and Bloomberg, but confirmed by neither Signature nor LedgerX.
In a statement, Signature Bank said, “while we cannot comment on specific clients, we are still in the process of holding some US dollar deposits from digital asset clients.”
In addition, Coinbase announced via tweets that it would stop using Silvergate as a banking partner for Coinbase Prime customers. The cryptocurrency exchange clarified that it has minimal corporate exposure to Silvergate and that it will transition to Signature Bank on March 2. In a note sent to customers, Coinbase wrote:
“Coinbase Prime has chosen to make changes to our USD bank partners. We are facilitating fiat withdrawals and deposits using Signature Bank, effective immediately. Please update your Coinbase payment instructions to Signature Bank.”
The decision to accept crypto exchanges, stablecoin issuers and bitcoin miners as clients helped triple Signature’s deposits from $33.4 billion in 2017. The bank started its crypto business four years ago and is one of the only federally regulated US banks known for to have taken large-scale deposits from crypto customers.
The signature faces its own challenges
In a class-action lawsuit filed last month, Signature is accused of “substantially facilitating” the commingling of funds between FTX and its private trading firm Alameda Research, which led to increased regulatory scrutiny for the bank.
Separately, Kraken recently reported to some users that Signature would be phased out of transactions below $100,000. Per Bloomberg, the exchange informed some users that it would no longer be able to make dollar deposits or withdrawals using Signature in amounts of less than this amount.
On November 1, 2022, Signature’s share price was $160.01. By March 3, SBNY was trading at $109.61.
Signature’s other businesses include wealth management and fund lending, where it banks capital calls to investment funds on behalf of clients.
In contrast, Silvergate, the ailing US bank owned by Silvergate Capital that has taken deposits from crypto clients, has defended its role in accepting deposits from FTX and Alameda Research. FTX was one of the world’s largest crypto exchanges before it failed in November. Signature Bank has stated that the deposit ratio of FTX and its related companies was less than 0.1% of its total deposits.
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