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Major crypto exchange Coinbase stated that it has millions in corporate cash balance with the shuttered Signature Bank.
According to a March 13 Twitter thread, as of the close of business on Friday, March 10, Coinbase had “an approximately $240m balance in corporate cash” at Signature.
The company, however, tweeted that,
“As stated by the FDIC, we expect to fully recover these funds.”
Regulators closed New York-based Signature on Sunday, two days after closing Silicon Valley Bank in a massive collapse affecting billions in deposits.
The Federal Deposit Insurance Corporation (FDIC) took control of Signature, which had $110.36 billion in assets and $88.59 in deposits at the end of 2022, per the New York state’s Department of Financial Services data, Reuters reported.
Coinbase said that,
“All client cash at banks continues to be protected by FDIC pass-through insurance. Due to FDIC’s hold on Signature’s transactions, we’re currently facilitating all client cash transactions with other banking partners.”
It did not name these “other” partners.
Signature’s was the third-largest failure in US banking history, Silicon Valley Bank’s shutdown was the second, and the first was Washington Mutual, which collapsed during the 2008 financial crisis.
On March 12, a joint Statement by Secretary of the Treasury Janet Yellen, the Federal Reserve (Fed) Board Chair Jerome Powell, and FDIC Chairman Martin Gruenberg, said that the FDIC received approval to “complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors.” Depositors will be able to access “all of their money starting Monday, March 13,” while no losses associated with this move will be borne by the taxpayer.
It added that,
“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. All depositors of this institution will be made whole [and] no losses will be borne by the taxpayer.”
The statement added that shareholders and “certain unsecured debtholders” would not be protected, while senior management had been removed. Additional funding will be made available to eligible depository institutions to help assure banks that they have the ability to meet all depositors’ needs.
“Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,” it said.
The regulators’ actions were designed to reduce spillover effects from the depositor outflows, a senior Treasury official reportedly said.
As reported in late January, Signature Bank set the $100,000 minimum limit in an effort to reduce its exposure to the crypto sector. Already in December last year, it had stated that it intended to reduce its exposure to clients operating in the crypto space by shedding about $10bn of deposits.
This decision came after the FTX fall in November, as well as a warning issued to banks by the FDIC, the Fed, and the Office of the Comptroller of the Currency (OCC) about risks in the crypto sector.
Along with the troubled Silvergate, Signature Bank was known as one of the biggest crypto-friendly banks in the US.
Meanwhile, Coinbase went on to say that,
“Despite the turbulence we have seen in the traditional banking sector recently, Coinbase continues to operate as usual. At Coinbase all client funds continue to be safe and accessible including USDC conversions which will resume on Monday.”
On March 11, the exchange said that it was “temporarily pausing” USDC/USD conversions over the weekend while banks are closed. It explained this move by saying that during periods of heightened activity, “conversions rely on USD transfers from the banks that clear during normal banking hours,” adding that customer assets remained safe and available for on-chain sends.
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Learn more:
– Lawmakers Seek Answers from Fed, FDIC on Silicon Valley Bank Collapse
– MicroStrategy Claims Minimal Exposure as Crypto.com, Coinbase, and Gemini Pause Transactions with Silvergate Bank – What’s Going On?
– Exchange Stablecoin Wars Hot Up – Coinbase to Suspend BUSD Trading on March
– Analysts Expect Coinbase Revenue to Drop 75% for Last Quarter
– How To Send Ethereum from Coinbase to MetaMask Wallet
– Why It Is Risky To Leave Your Cryptocurrency In Exchange
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