Treasury Secretary Janet Yellen. Alex Wong — Getty Images
After crypto-friendly Silvergate announced it would voluntarily liquidate amid a capitalization crisis, the blockchain firm is one of the last U.S. banks to provide financial services to a volatile industry in New York. was flooded with signing banks based in
Two days after the shocking collapse of Silicon Valley Bank, the New York Department of Financial Services announced on Sunday that it had acquired Signature, which has a total of $88.59 billion in deposits.
In a joint statement, the Treasury Department, Federal Reserve Board, and FDIC announced a systemic risk exception to signature.
“The U.S. banking system remains resilient and on strong footing, largely because reforms enacted after the financial crisis have made the banking industry more safe-guarded,” the statement said. increase. “These reforms and today’s actions demonstrate our commitment to taking the necessary steps to keep depositors’ savings safe.”
Friday’s failure of Silicon Valley Bank, the first FDIC-insured institution since 2020, sparked fears of contagion to the financial system. Like Silvergate, SVB had a concentrated deposit base and primarily served the tech industry, while Silvergate catered to cryptocurrency companies.
SVB did not have many customers in the crypto space, but its failure still had a direct impact on the sector. its reserves. USDC swayed against the peg over the weekend, occasionally dipping below 90 cents on major exchanges.
Yet Signature, which emerged as the new safe haven for cryptocurrency companies such as Coinbase, continued to operate.Stocks plummeted, trading halted on Friday, banking expert said luck That signing appeared to have stronger fundamentals thanks to a more diverse deposit base. Unlike Silvergate and SVB, Signature, like other seemingly shaky banks like First Republic, also served everyday customers.
Sunday’s announcements by the NYDFS and three federal bank regulators show how quickly the situation has devolved. Over the weekend, many in the tech industry and financial luminaries such as former Treasury Secretary Larry Summers called for SVB depositors to complete to avoid further spreading panic.
Treasury Secretary Janet Yellen insisted there was no government bailout for SVB, but regulators were rushing to find a solution, including starting an auction of failed banks.
Sunday night’s unusual statement shows the agency has found a way to protect depositors and stem the outflow of funds that have shaken confidence at smaller banks.
For crypto companies partnering with Signature, the announcement brings immediate reassurance that their deposits will be protected, but the question of where they can find banking services still remains an open question. Regulators have repeatedly warned about the liquidity risk cryptocurrency customers have posed to the banking sector in the wake of the FTX demise, and Silvergate’s failure will likely put financial institutions at a distance. With Signature now owning NYDFS, the industry has no choice.