The New York State regulatory agency closed Signature Bank, based in New York, on Sunday, March 12th, two days after the collapse of Silicon Valley Bank. This bank focused on the cryptocurrency industry, and its collapse will bring serious problems to this industry.
Signature Bank was the third largest bank in US history to collapse, with total assets of up to 110.36 billion US dollars. As of September of 2022, nearly a quarter of the bank's deposits came from the cryptocurrency field. As of March 8th, it still had 16.5 billion US dollars in cryptocurrency-related deposits. This means that the collapse of Signature Bank may bring serious problems to the cryptocurrency industry.
Many well-known cryptocurrency companies have a large amount of funds deposited in Signature Bank, including Coinbase, the largest cryptocurrency exchange in the United States, and cryptocurrency company Paxos. In addition, Signature Bank operates the Signet payment network, providing round-the-clock real-time payment services for cryptocurrency customers, and is the main choice for many cryptocurrency customers to send payments or pay wages to exchanges and suppliers.
The collapse of Signature Bank will restrict the liquidity of the cryptocurrency market, and cryptocurrency customers may not be able to quickly enter or exit exchanges, affecting the normal operation of the industry. The cryptocurrency industry has been trending towards de-banking, and a round-the-clock fast payment channel is crucial to its operation.
Prior to Signature Bank, two other cryptocurrency-friendly banks, Silvergate and Silicon Valley Bank, had collapsed in succession. This has raised concerns in the industry about the stability and sustainability of the cryptocurrency industry.
Campbell, a professor at Columbia Business School, pointed out that the cryptocurrency industry has been moving further away from the banking system, especially in round-the-clock fast payment channels. The problems that the collapse of Signature Bank has brought to the cryptocurrency industry highlight the industry's dependence and vulnerability in the financial system, and require more attention and response.
iLead Financial, Securities Department's lawyer stated, "As a lawyer, I believe that the collapse of Signature Bank may bring serious problems to the cryptocurrency industry. Signature Bank has been an important partner of the cryptocurrency industry in the past few years, and its Signet payment network provides 24/7 real-time payment services for cryptocurrency clients. In addition, Signature Bank is also the deposit bank for some well-known cryptocurrency exchanges and companies, including Coinbase and Paxos. Therefore, the collapse of Signature Bank may cause these cryptocurrency exchanges and companies to be unable to smoothly access their funds, affecting the liquidity of the cryptocurrency market.
“Furthermore, the collapse of Signature Bank also means that the cryptocurrency industry may lose a bank with a global 24/7 settlement system, which is a major blow to cryptocurrency clients. Prior to this, there have been two other banks friendly to cryptocurrencies that have collapsed, including Silvergate and Silicon Valley Bank, and the collapse of Signature Bank has made the uncertain situation in terms of banking partners faced by the cryptocurrency industry even more pronounced.
“Therefore, I believe that regulatory agencies and the cryptocurrency industry need to closely monitor the impact of the collapse of Signature Bank and take measures to alleviate possible problems, to protect the interests of cryptocurrency clients and the market. This may include seeking alternative banking partners or payment systems, strengthening regulatory and compliance measures, to ensure the normal operation of the cryptocurrency industry and market stability. At the same time, cryptocurrency companies and investors should also manage risks prudently, diversify their fund custody channels, in order to respond to the impact that similar events may bring.”