Signature Bank Shut Down by State Regulators, USDC Recovers

  • NYDFS took possession of Signature in order to protect the economy and strengthen the confidence in the banking system, and assured customers that all deposits will be returned.
  • The price of USDC also started to recover after its issuer, Circle, revealed that all stablecoin reserves held at Silicon Valley Bank (SVB) were safe, and that the company had new banking partners.


New York-based Signature Bank was shut down on Sunday by the New York Department of Financial Services (NYDFS) in order to “protect depositors”, the state regulator said in a press release on 12 March.

According to the announcement, the NYDFS took possession of Signature Bank through Section 606 of the New York Banking Law, and appointed the U.S. Federal Deposit Insurance Corporation (FDIC) as receiver of the crypto-friendly bank. A joint statement from the FDIC, Treasury Department, and Federal Reserve noted that the move was made to protect the U.S. economy and strengthen the “public confidence in our banking system”, and assured customers that all their deposits in Signature will be returned. The statement reads:

“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. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”

Shortly after the news broke out that Signature Bank — which services many firms in the crypto industry — was shutting down, Tether and revealed they had zero exposure to the bank. Crypto exchange Coinbase, said it had around $240 million in corporate funds that it expected to recover, while stablecoin issuer Paxos noted it held $250 million at the bank, and that it had private insurance for the amount not covered by the standard FDIC insurance.

The closure of Signature Bank marks the third crypto-friendly bank to collapse in the last week, following Silvergate Bank’s voluntary liquidation of assets on Wednesday, and the closure of Silicon Valley Bank (SVB) on Friday by California’s financial watchdog. The collapse of SVB also affected the crypto market, with the USDC stablecoin loosing its peg to the U.S. dollar after Circle disclosed that $3.3 billion of the $40 billion in USDC reserves were held at SVB.

The popular stablecoin, however, started to recover its U.S. dollar peg after Circle CEO Jeremy Allaire said that its reserves were safe, and that the firm has new banking partners lined up at “banking open tomorrow morning”. The Federal Reserve also established a funding program for banks that provide $25 billion aimed at backstopping banks and other depository firms.

Related Coverage
Coinbase and Paxos Terminate Relationship With Silvergate Bank
  • Both crypto exchange Coinbase and stablecoin issuer Paxos have stated that they will no longer accept or initiate U.S. dollar payments through Silvergate Bank.
  • The two noted that cash transactions for institutional clients will now be carried out through their other banking partners, and that the move had no impact on pound and euro payments.
March 2, 2023, 4:40 PM


Paxos in “Constructive Discussions” With SEC Over BUSD
  • Stablecoin issuer Paxos has engaged the SEC in “constructive discussions” over its allegation that BUSD is a security, ready to defend its position in litigation.
  • The company also revealed it will be ending its relationship with Binance, but noted that the decision was separate from the NYDFS and SEC investigations.
Paxos Disagrees With SEC That BUSD is a Security
  • Paxos confirmed it had received a Wells Notice from the U.S. SEC on 3 February, that claimed BUSD was an unregistered security.
  • The company said it “categorically disagrees” with the SEC’s claim, and that it was prepared to “vigorously litigate if necessary”.