The recent closure of Signature Bank by New York regulators on March 12 has resulted in a warning to cryptocurrency clients to withdraw their funds or have their accounts closed by April 5. According to reports, the Federal Deposit Insurance Corporation (FDIC) confirmed that these deposits belonged to digital asset clients, and the bank was experiencing a bank run that posed a “systemic risk” to the US economy.
While New York Community Bancorp bought most of the deposits and loans held by Signature Bank on March 19, the deal did not include approximately $4 billion of deposits related to the bank’s digital banking business. The FDIC asked interested banks to submit bids for the acquisition of the assets of Signature Bank, but requested they forgo backing any cryptocurrency services.
The crypto community has expressed concern about the treatment of crypto-related assets by banks. The closure of Signature Bank’s crypto-related accounts is seen as a blow to crypto adoption by banks, as it is a reminder that centralized entities like banks could pose a threat to the crypto space.
The fate of Signet, Signature’s payments platform that uses blockchain technology to facilitate real-time payments with no transaction fees or limits, is still uncertain. The ongoing investigation into careless oversight that permitted financial wrongdoing makes it difficult for the bank to recover. Regulators want to sell the entire businesses of Signature Bank and Silicon Valley Bank, but they may consider offers for just a portion of the banks.
Representative Tom Emmer worries that the federal government is using problems in the banking sector as “weapons” to target cryptocurrencies, and the authorities continue to deny claims that they are anti-crypto. However, they place the blame for all of these actions on their lack of faith in the bank’s management.
For Signature Bank clients who have their accounts closed, they will receive a check to their registered address. Anyone with funds held with Signature should ensure their registered address is up-to-date to avoid any delays or complications. The event highlights the need for crypto users to exercise caution when dealing with centralized entities and underscores the importance of decentralized solutions in the crypto space.
