Signature Bank suffers $4.27B in deposit outflows as crypto uncertainty takes hold

Signature Bank has released its mid-Q3 update showing a decline in spot deposit balances attributed to crypto outflows totaling $4.27 billion.

“Digital deposit outflows are driven by the recent ‘crypto winter’, or the downturn in cryptocurrency markets.”

In contrast, non-crypto deposits increased to $2.64 billion so far in the quarter, with “specialized mortgage solutions” making up the bulk of that figure, accounting for $2.29 billion.

Despite pressure from the digital assets, the bank stated that it is “well positioned to meet [its] target for combined loans and securities growth” for the third quarter.

Signature Bank has a unique place

Signature Bank provides financial services to institutional crypto traders and crypto businesses, including exchanges and miners.

The blockchain-based Signet platform underpins this, enabling crypto clients to transact more efficiently by settling in real-time without incurring transaction fees.

“… allows Signature Bank’s commercial customers to make payments in US dollars 24 hours a day, seven days a week, 365 days a year.”

Signet bridges the gap between the US banking system that does not operate real-time payments and crypto markets that are tradable at all times.

Signature Bank and its main rival, Silvergate Bank, are two of the only US banks that operate real-time payment networks and are crypto-friendly.

In July, upon the release of its second quarter results, Signature Bank investors expressed their concern about large-scale crypto outflows.

The report stated that its total deposits fell $5.04 billion to $104.12 billion during the second quarter. This was primarily due to a reduction in customer balances from the New York Banking Team, which decreased by $2.4 billion, and a drop in deposits from the Digital Asset Banking Team of (also) $2.4 billion.

Crypto winter bites hard

According to the Financial Times, Signature Bank was one of the best performing banks last year due to increasing deposits from the crypto industry. But, fast forward to now, and deep into crypto winter, all that has changed.

This is particularly noticeable in the company’s share price, which has fallen 49% since the turn of the year.

Still nursing the pain of tanking token prices and the fallout from CeFi bankruptcies, uncertainty continues to reign over the crypto industry.

Nevertheless, Signature Bank CEO Joe DePaolo explained that the bank’s direct crypto exposure is zero, as it only holds the dollar deposits of its customers and no crypto.

“It happens to be an ecosystem that we serve, but we have no exposure to the digital world or the crypto world. We had one loan that we’ve done so far and it was paid back. So we have no loans outstanding. We have no digital assets on our books.”