Feds shut down crypto-focused signature bank citing systemic risks
Signature Bank is the next bank to be shut down by federal regulators. Regulators shut down the crypto-focused bank, citing systemic risk.
The Federal Reserve has closed Signature Bank, as revealed in a press release issued on March 12. The regulators noted that they were concerned about the systemic risks posed by the crypto-focused bank. The FDIC will make all depositors in the bank whole.
The closure marks yet another bank failure in the US, and the closure of Silicon Valley Bank raises fears in many countries. Regarding the decision, the authorities said it was an attempt to protect the country’s economy,
“Today, we are taking decisive action to protect the American economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its important roles of protecting deposits and providing access to credit to households and businesses in a way that promotes strong and sustainable economic growth.”
There are many ongoing discussions about the potential impact of the closure of Silicon Valley Bank, not the least of which is the effects on the tech startup scene. The regulators seem confident that the measures taken after the 2008 recession are enough to prevent a large-scale crisis.
Signature Bank is one of the largest crypto banks in the country, behind another major crypto-associated bank in turmoil – Silvergate. The markets have reacted in the same way, seeing red before regaining some growth throughout the year.
Signature Bank, Silicon Valley Bank and Silvergate Royal Markets
The discussions surrounding Silicon Valley Bank and Silvergate have dominated the headlines recently. Analysts have noted what US Treasury Secretary Janet Yellen has said, and the latter confirms that Silicon Valley Bank will not receive a bailout. The focus is on protecting depositors.
Silvergate has also decided to close down, voluntarily liquidate its assets to repay all deposits in full. It is also discontinuing the Silvergate Exchange Network (SEN), a platform that offers secure, institutional access to capital through loans in US dollars backed by bitcoin.
Could crypto be a strong focus now?
Former US politician Barney Frank placed much of the blame on cryptocurrencies, which he believes have a “potentially destabilizing” effect on the financial system. Some other US lawmakers have similar opinions about cryptocurrencies, although there are some who believe in the asset class potential.
Meanwhile, researchers at JPMorgan Chase believe the Silvergate collapse will test the crypto industry. Offering some relief to investors, Binance CEO Changpeng Zhao has confirmed that the popular exchange has no exposure to Silicon Valley Bank.
Disclaimer
BeInCrypto has reached out to the company or person involved in the story for an official statement on the latest development, but has yet to hear back.
