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One of the largest crypto creditors, Signature Bank, has been shut down by New York state authorities.
The officials have also declared that all the lenders of this organization will be fully reimbursed and no taxpayers will suffer losses, as was the case with the resolution of Silicon Valley Bank.
This decision was made on Sunday, and the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp. provided a brief explanation in the evening: “We are also announcing a similar systemic risk exception for Signature Bank, New York, which was closed today by its state chartering authority.”
Similar to the arrangement made for investors at the collapsed Silicon Valley Bank, the authorities made it clear that the depositors of Signature Bank will also be able to access their funds fully:
“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by taxpayers.”
Signature Bank is one of the main banks serving the cryptocurrency industry, the second-largest one after Silvergate, which announced its impending liquidation last week. According to FactSet, Signature had a market value of $4.4 billion as of Friday after a 40% sell-off this year.
The final decision regarding the closure of Silicon Valley Bank
On March 10, the decision to shut down Silicon Valley Bank was put into action. The closure of the financial institution, coupled with the confiscation of funds, led to the largest collapse in the US since the 2008 crisis. This drastic action was taken just days after the bank, which focuses on the technology industry, reported financial difficulties, leading to a rush of customers withdrawing their deposits.
Signature bank`s worth
Signature Bank is a prominent bank serving the cryptocurrency market, and it is the second-largest of its kind along with Silvergate, which announced its intention to liquidate last week. Despite experiencing a 40% drop in value this year, Signature still had a market capitalization of $4.4 billion as of Friday, according to FactSet.
The worth of Signature was estimated to be $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.
Crisis control
The authorities came up with a special strategy to cover all deposits at both Signature Bank and Silicon Valley Bank in order to decrease the negative outcome and prevent a larger crisis.
The estimated limit was set at $250,000, and depositors who were not covered by it were still compensated by the FDIC’s deposit insurance fund. However, the leading Treasury official mentioned that both equity and bondholders at the banks would lose their investments.