Leading cryptocurrency exchange Coinbase claimed to have millions of dollars in corporate cash on hand at the defunct Signature Bank.
On of Friday, March 10, at the close of business, Coinbase had “an approximately $240m balance in corporate cash” at Signature, according to a March 13 Twitter thread.
Two days after closing Silicon Valley Bank due to a major collapse involving billions in deposits, regulators shut down New York-based Signature on Sunday.
According to records from the New York state Department of Financial Services, Signature had $110.36 billion in assets and $88.59 billion in deposits by the end of 2022 when the Federal Deposit Insurance Corporation (FDIC) took over, according to Reuters.
According to Coinbase,
“FDIC pass-through insurance continues to provide protection for all client funds at banks. We are now coordinating all customer cash transactions with other banking partners due to the FDIC’s hold on Signature’s transactions.
These “other” partners were not identified.
Washington Mutual, which failed during the 2008 financial crisis, was the first, followed by Silicon Valley Bank’s closure as the three biggest banking failures in US history.
The FDIC was given permission to “complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors,” according to a statement released on March 12 by Treasury Secretary Janet Yellen, Federal Reserve (Fed) Board Chair Jerome Powell, and FDIC Chairman Martin Gruenberg. Beginning on March 13, depositors will have access to “all of their money,” and taxpayers will not bear any losses as a result of this action.
It further stated,
“We are also announcing a comparable systemic risk exemption for the recently shut down Signature Bank of New York, New York. There will be no damages incurred by the taxpayer, and all depositors of this institution will be fully reimbursed.”
In addition, the statement said that senior management had been fired and that “some unsecured debtholders” would no longer be protected. To help ensure banks have the capacity to meet all depositors’ needs, additional funding will be made available to eligible depository institutions.
According to the law, banks must pay a special charge to compensate any losses to the Deposit Insurance Fund that result from supporting uninsured depositors.
According to a senior Treasury official, the authorities’ efforts were intended to lessen the impacts of the depositor outflows’ spillover.
The $100,000 minimum restriction was established by Signature Bank in an effort to lessen its exposure to the cryptocurrency market, as was reported in late January. It had already declared in December of last year that it wanted to lose around $10 billion in deposits in order to lessen its exposure to clients working in the cryptocurrency industry.
This choice was made in response to the November FTX decline as well as warnings from the FDIC, the Fed, and the Office of the Comptroller of the Currency (OCC) to banks on risks in the cryptocurrency industry.
One of the largest crypto-friendly banks in the US, along with the troubled Silvergate, was Signature Bank.
Coinbase continued by stating that,
“Coinbase continues to run as usual despite the recent turmoil in the traditional banking industry. All customer money at Coinbase are still secure and readily available, including the USDC conversions that will start up again on Monday.”
The exchange announced on March 11 that it would “temporarily pause” USDC/USD conversions over the weekend because banks would be closed. It provided an explanation for this action by stating that during times of increased activity “conversions rely on USD transfers from the banks that clear during normal banking hours,” while also stating that customer assets remained secure and accessible for on-chain sends.
