- Signature, Silvergate and Silicon Valley Bank are all now defunct
- Signature’s Signet platform was a key bridge between crypto and TradFi
- Is the U.S. government sending an anti-crypto message?
- Crypto is a resilient industry and markets still rallied despite the news
On Sunday 12 March, U.S. regulators seized control of Signature Bank, under the guise of preventing the spread of a financial crisis.
“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” said the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation (FDIC), in a joint statement.
As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.
However, to stem the contagion and stave off a potentially systemic crisis, the Federal Reserve and the Treasury formed an emergency program to backstop all deposits at Signature using the Fed’s emergency lending authority. This was the same measure taken with Silicon Valley Bank.
Signature was one of the last crypto-friendly banks
Signature was a crypto-friendly bank, providing numerous on and off-ramp services to large cryptocurrency firms. Through their blockchain-based Signet platform, Signature helped power the 24/7 crypto market.
This key piece of infrastructure allowed institutional users to exchange crypto and fiat in real time. And along with Silvergate’s SEN network, these two systems were responsible for moving $2 trillion in and out of the digital asset market.
As part of the collapsing ecosystem, Silvergate announced its impending liquidation last week, meaning their SEN platform is now defunct. Silvergate included USDC stablecoin issuer Circle and a range of other high profile crypto firms in their customer portfolio.
The U.S. government is sending an anti-crypto message
In a series of interviews one of Signature Bank’s board members, Barney Frank – a former representative who helped draft the landmark Dodd-Frank Act post-2008 financial crisis – claimed U.S. regulators shut down Signature to send a “strong anti-crypto message.”
Since then, in an article published by Reuters, it’s been reported that Signature is now in the hands of the Federal Deposit Insurance Corporation (FDIC), which has mandated certain conditions for possible buyers of the failed lender. One of these conditions is that they “agree to give up the bank’s crypto business”.
This provides further evidence to the rumors that the U.S. government is purposefully stifling crypto companies’ access to traditional finance, in an effort to suffocate the American digital asset industry as a whole.
In what has been dubbed Operation Choke Point 2.0, in reference to a previous Department of Justice strategy to target banks working with certain sectors they deemed undesirable, one by one links between crypto and traditional finance are being severed.
The crypto industry will persevere
Although the Signet platform is still operational, major crypto companies such as Circle have ceased using it.
And Silvergate’s SEN system has been shut down. If the FDIC have they’re way, and the buyers of the now defunct Signature Bank have to give up the institution’s crypto partners, it likely means the Signet platform will be shut down permanently.
Yet, many in the crypto community remain defiantly optimistic. There’s a sense that the industry has overcome similar hurdles in the past, and will simply forge new TradFi relationships, create new on-ramps between the two financial sectors, and continue to innovate.
The real shame is, this will have to be done off-shore, taking valuable business out of the U.S. economy, and ultimately giving American crypto consumers less choice.
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