Get cash by April 5
The White House issues an order on crypto and CBDC
The collapses earlier this month of Silicon Valley Bank, Silvergate Bank and Signature Bank — three institutions considered cryptocurrency-friendly — continue to reverberate through financial services. The latest part of the fallout concerns crypto customers of Signature Bank, who have been given a deadline of April 5 to close their accounts and move their money.
Flagstar Bank, a unit of New York Community Bancorp, entered into a deal to rescue Signature Bank a week after its collapse on March 12, but the move did not cover the crypto deposits. Hence the deadline of April 5.
“These are the deposits we are encouraging customers to move before April 5,” an FDIC spokesperson told Reuters. “If they haven’t by that day, we’ll send checks to the address on file.”
Unsuccessful. Unsuccessful. Unsuccessful.
The failures of Silvergate Bank, Silicon Valley Bank and Signature Bank came in rapid succession:
- Silvergate Bank, March 8: The California bank’s owner, Silvergate Capital Corp., announced it would “discontinue operations and voluntarily liquidate the bank in an orderly manner in accordance with applicable regulatory processes.” The bank, long a provider of financial services and lending to cryptocurrency developers and exchanges, had been riding high during the crypto bull market, but saw its deposits plummet during the crypto winter.
- Silicon Valley Bank, March 10: The bank, based in Santa Clara, Calif., suffered an old-fashioned bank run, with depositors withdrawing money at a tremendous rate and forcing the bank to sell bonds at a loss of $1.8 billion. That scared the depositors, who later withdrew even more money. The bank’s stock price fell, trading was halted, and the state of California stepped in and placed it in receivership under the FDIC.
- Signature Bank, March 12: The SVB closure rolled into New York-based Signature Bank, where customers withdrew billions of dollars. On March 10, the bank saw its stock drop 23%, the biggest drop since it went public in 2004. Two days later, the bank fell.
The information about Signature Bank
The Signature Bank failure in particular has drawn skepticism from some observers because the status of the balance sheet did not seem as dangerous as the others. Former U.S. Rep. Barney Frank, a banking board member, suggested that regulators “wanted to send a very strong anti-crypto message.”
“The additional scrutiny that Signature is receiving is likely due to Department of Justice investigations alleging that (Signature) did not have adequate processes and internal systems in place to monitor or detect money laundering,” said Joel Hugentobler, an analyst in Javelin Strategy & Research’s cryptocurrency practice. “Whether or not it was actually money laundering has yet to be determined.”
The broader impact on crypto
What is clear is that the rise of the three crypto-friendly banks has contributed to the tumult in the industry. Hugentobler indicated that the most reliable on- and off-ramps between cryptocurrencies and fiat currencies have eroded as a result.
“I think other substitutes will emerge,” he said, “but they will need to implement more stringent processes to combat money laundering, among other areas of concern that banks have recently experienced.”
