Signature Bank Collapse: Coinbase, Paxos Disclose Massive Exposure (2024)

FAQs

Why did Signature Bank fail crypto? ›

(FDIC). An April 2023 FDIC report blamed Signature's failure on bank mismanagement, a lack of corporate governance, and failure to listen to and respond quickly to the FDIC's recommendations. Signature Bank's failure raised many policy questions around FDIC insurance, and bank and cryptocurrency oversight.

“If a crypto entrepreneur wants to start something in the U.S. but can't open a bank account, they're either going to give up or move their activity offshore,” he says. Such a situation would also affect retail customers hoping to buy and sell crypto on their own.

In March, Signature Bank became the third-largest U.S. bank failure. Before its failure in mid-March, New York–based Signature had earned a reputation as a crypto-friendly bank, thanks in large part to its groundbreaking Signet real-time payments platform.

Signature Bank was shut down after its customers withdrew billions of dollars in the wake of the collapse of SVB. Along with the run on deposits, the bank's stock saw its biggest one-day decline on March 10 — of 23 percent — since the bank went public in 2004.

In case you don't remember, Signature Bank had gotten shipwrecked in March 2023, alongside the other infamous "crypto-deposit banks", Silvergate Bank and First Republic Bank. Its stock had to be considered worthless, at least by conventional wisdom.

Why did it collapse? The collapse happened for multiple reasons, including a lack of diversification and a classic bank run, where many customers withdrew their deposits simultaneously due to fears of the bank's solvency. Many of SVB's depositors were startup companies.

The collapses of Silicon Valley Bank and Signature Bank in March 2023—then the second- and third-largest bank failures in U.S. history—took consumers by surprise. Subsequently, three more banks failed in 2023: First Republic Bank in May, Heartland Tri-State Bank in July and Citizens Bank of Sac City in November.

Banking crises put a shine on bitcoin. Driving the news: As one bank failed and another closed, bitcoin and other crypto got a boost, market experts tell Axios — all linking the weekend banking crisis to changing expectations.

Signature Bank, New York, NY (“Signature”) was closed on March 12, 2023 by the New York Department of Financial Services, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver.

NYCB subsidiary Flagstar Bank acquired Signature on March 19, 2023, a week after the Federal Deposit Insurance Corp.

Can I still use my Signature Bank account? ›

Your ATM/debit card and your personal checks will continue to work as usual. Direct deposits you set up will continue to appear in your account as usual.

The collapse happened for multiple reasons, including a lack of diversification and a classic bank run, where many customers withdrew their deposits simultaneously due to fears of the bank's solvency. Many of SVB's depositors were startup companies.

The bank was closed “apparently due to similar funding pressures as it related to the company's crypto banking,” wrote D.A. Davidson analyst Gary Tenner in a report Monday. He said deposits started to leave the bank, similar to what happened at SVB.

The realized that things were only going to get worse and they still wanted their annual bonuses. So they took the prudent step of announcing a voluntary wind down and liquidation in a plan that would ensure that all depositors would be repaid in full over time. This was Wednesday, March 8th.

“The problems that faced Silvergate were primarily a result of less-than-adequate risk management, notably one of relying too much on volatile short-term deposits while lending or investing at a longer duration,” Weisberger said.