US authorities have ordered the closure of Signature Bank, a major lender to the cryptocurrency industry, citing concerns over systemic risk in the banking system.
In a joint statement issued by the US Treasury, the Federal Reserve (Fed), and the Federal Deposit Insurance Corporation (FDIC), the decision to close Signature Bank, which is based in New York state, was made to prevent potential risks to the banking system. The statement also reassured customers that they would have full access to their deposits.
Signature Bank is a significant lender to the cryptocurrency industry, and its stock price has plummeted by nearly 40% this year following the announcement by rival bank Silvergate Capital that it would cease operations and sell assets to pay off its debts.
As of December 31, 2022, Signature Bank has total assets of $1.104 billion and $88.6 billion in deposits, according to filings with the US Securities and Exchange Commission.
The closure of Signature Bank comes just a day after the California Department of Finance and Innovation announced the closure of Silicon Valley Bank (SVB) on March 11. Reports suggest that the Fed has created a “Bank Term Funding Program” to protect financial institutions from the impact of SVB’s bankruptcy.
The closure of Signature Bank raises concerns over the potential impact on the cryptocurrency industry, which relies heavily on the banking sector for financing and liquidity. It remains to be seen how this decision will affect the wider financial markets and whether other banks may face similar regulatory action in the future.