Signature Bank

‘Ludicrous’ to think Signature Bank’s collapse was connected to crypto, says NYDFS head

The superintendent of the New York Department of Financial Services reportedly dismissed claims the U.S. government was working to implement “Operation Choke Point 2.0.”

Adrienne Harris, superintendent of the New York Department of Financial Services, has reportedly said the closure of the crypto-friendly Signature Bank in March had nothing to do with exposure to digital assets.

According to an April 5 report in The Wall Street Journal, Harris made the remarks at the Chainalysis Links conference in New York City. She reportedly described the events leading up to the failure of Signature as a “new-fashioned bank run,” calling the idea that it had any relation to crypto exposure “ludicrous.”

Harris also reportedly pushed back against the idea that the United States government was actively working to limit certain industries’ access to U.S. banking services in what many have dubbed “Operation Choke Point 2.0.” The original Operation Choke Point, implemented by the U.S. Department of Justice from 2013 to 2017, targeted banks suspected to have exposure to companies potentially involved in fraud or money laundering.

Earlier today #NYDFS Superintendent Adrienne Harris joined CSO and co-founder @jony_levin to discuss the future of digital asset oversight and important developments in global financial regulation at @chainalysis #Links23 pic.twitter.com/7ie6HnDVRr

— NYDFS (@NYDFS) April 5, 2023

The NYDFS took control of Signature Bank on March 12, claiming it was protecting the U.S. economy from “system risk.” The bank was the latest failure following the collapse of the crypto-friendly Silvergate Bank and Silicon Valley Bank.

Former House of Representatives member and Signature board member Barney Frank said there had been no issue with the bank’s solvency at the time of the seizure, suggesting regulators were making a “very strong anti-crypto message.” Some lawmakers including Colorado Senator Michael Bennet said Signature did not make “prudentially sound” decisions by associating with crypto firms.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Tether ‘unequivocally reiterates’ no exposure to Signature Bank

The stablecoin provider denied the allegations that began to surface in regard to its exposure to the now-collapsed Signature Bank.

After a Bloomberg article alleged exposure between stablecoin provider Tether and the now-collapsed Signature Bank, rumors began to circulate regarding the involvement between the two companies.

However Tether immediately reached out to clarify the claims made in the original article. In an email sent to Cointelegraph among other outlets, Tether gave an official response to the situation in which it said it wants to “unequivocally re-iterate that it has no exposure to Silvergate, Silicon Valley Bank and Signature Bank.”

The stablecoin issuer went on to highlight a section of the article that pointed out no issue of a collaboration between Tether and Signature Bank, and that it “failed” to explain that there was no account set up.

Cointelegraph reached out to Tether for further clarification on the situation.

Initial claims in the article said that Tether was gaining access to the United States banking system through Signature by encouraging users to send U.S. dollars via Signature’s Signet to its Bahamian partner Capital Union Bank.

These claims from Bloomberg surfaced despite the fact that Tether chief technology officer Paolo Ardoino took to Twitter on March 12 to clarify that the company had zero exposure to Signature Bank. On March 2 and 10 he tweeted that the company had no exposure to Silvergate and Silicon Valley Bank (SVB), respectively.

At the recent Paris Blockchain Week 2023 event, Ardoino told Cointelegraph that Tether has around $1.7 billion in excess reserves. He continued to call USDT (USDT) one of the “safest assets to hold in the world” in the aftermath of the banking crisis.

This comes after Tether came back at the Wall Street Journal’s ‘stale allegations’ on March 3 that the company faked documents to open bank accounts. The report alleged that Tether faked sales invoices, transactions and hid behind third parties to have opportunities to open bank accounts it couldn’t have otherwise.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

Tether ‘unequivocally reiterates’ no exposure to Signature Bank

The stablecoin provider denied the allegations that began to surface in regard to its exposure to the now-collapsed Signature Bank.

After a Bloomberg article alleged exposure between stablecoin provider Tether and the now-collapsed Signature Bank, rumors began to circulate regarding the involvement between the two companies.

However, Tether immediately reached out to clarify the claims made in the original article. In an email sent to Cointelegraph, among other outlets, Tether gave an official response to the situation in which it said it wants to “unequivocally re-iterate that it has no exposure to Silvergate, Silicon Valley Bank and Signature Bank.”

The stablecoin issuer went on to highlight a section of the article that pointed out no issue of a collaboration between Tether and Signature Bank and that it “failed” to explain that there was no account set up.

Cointelegraph reached out to Tether for further clarification on the situation.

These claims from Bloomberg surfaced despite the fact that Tether chief technology officer Paolo Ardoino took to Twitter on March 12 to clarify that the company had zero exposure to Signature Bank. On March 2 and 10, he tweeted that the company had no exposure to Silvergate and Silicon Valley Bank (SVB), respectively.

At the recent Paris Blockchain Week 2023 event, Ardoino told Cointelegraph that Tether has around $1.7 billion in excess reserves. He continued to call Tether (USDT) one of the “safest assets to hold in the world” in the aftermath of the banking crisis.

This comes after Tether came back at The Wall Street Journal’s “stale allegations” on March 3 that the company faked documents to open bank accounts. The report alleged that Tether faked sales invoices and transactions and hid behind third parties to have opportunities to open bank accounts it couldn’t have otherwise.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

Stablecoin issuer Tether accessed US banking system using Signature: Report

At the time New York regulators took control of Signature in March, there was reportedly a system in place for Tether clients to send dollars through the bank’s Signet platform.

Tether, the firm behind the largest stablecoin by market capitalization, reportedly allowed its clients to send funds through Signature Bank’s payments platform — granting the firm access to United States banks.

According to an April 4 Bloomberg report, Tether had a pathway to the U.S. banking system by instructing its users to send dollars though Signature’s Signet to its Bahamian partner Capital Union Bank. The report cited “people with knowledge of the situation,” who added this system was in place at the time regulators took control of Signature in March.

Tether doesn’t have direct access to the US banking system, but for a while it found at least one pathway: through Signature Bank https://t.co/gKDgTs6Jae

— Bloomberg (@business) April 4, 2023

While the arrangement between Tether and Signature reportedly would not have been illegal, failing to disclose such information to the investing public would suggest high-risk practices. According to a Tether spokesperson, banks used by the stablecoin issuer “always had access to several banking channels and counterparties,” and associate entities “wouldn’t be affected by either direct or indirect exposure to Signature.”

The New York Department of Financial Services announced the shutdown of Signature on March 12, saying at the time the decision had been made with the Federal Deposit Insurance Corporation in an effort to “protect the U.S. economy.” Stablecoin issuer Paxos reported at the time it had $250 million tied to Signature, while Tether’s chief technology officer Paolo Ardoino said the firm didn’t have any exposure to the failed bank.

#tether doesn’t have any exposure to Signature Bank.

— Paolo Ardoino (@paoloardoino) March 12, 2023

U.S. lawmakers continue to look into the collapse of the crypto-friendly bank, the third in a chain starting with Silvergate and Silicon Valley. At a March 28 hearing of the Senate Banking Committee, FDIC chair Martin Gruenberg said Signature had not adequately managed traditional banking risks. Though Signature had reduced its exposure to digital assets in the wake of the collapse of the FTX exchange, one user has filed a lawsuit alleging the bank “aided and abetted” fraud facilitated by former FTX CEO Sam Bankman-Fried.

The bank plans to sell its roughly $38 billion worth of deposits and $13 billion in loans to Flagstar Bank, a subsidiary of New York Community Bancorp. Gruenberg said $4 billion in crypto deposits would likely be returned to users sometime this week.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

FDIC plans to return $4B in Signature crypto deposits ‘by early next week’ — Martin Gruenberg

The Treasury Department’s undersecretary for domestic finance, Nellie Liang, said at the same hearing she didn’t believe crypto “played a direct role” in the failure of the banks.

Martin Gruenberg, chair of the United States Federal Deposit Insurance Corporation, has said the agency plans to return roughly $4 billion in deposits connected to Signature Bank’s digital asset banking business by early April.

In a March 29 hearing of the U.S. House Financial Services Committee exploring federal regulators’ responses to recent bank failures, Gruenberg said the deposits that were not included in the bid from a New York Community Bancorp subsidiary for Signature would be returned “by early next week.” There are $4 billion in deposits tied to digital assets, and reports had indicated that the FDIC would close all crypto-related accounts not part of the NYCB deal by April 5 if depositors didn’t move their funds.

*FDIC chair Martin Gruenberg speaking at a March 29 hearing of the U.S. House Financial Services Committee*

According to Gruenberg, Signature’s payments platform Signet — which, along with the digital asset deposits, was not included in the NYCB bid — was “in the process now of being marketed” to potential buyers. The FDIC, along with New York financial regulators, closed the crypto-friendly bank on March 12, citing risks to the U.S. economy after Silicon Valley Bank and Silvergate Bank had failed.

Nellie Liang, undersecretary for domestic finance at the U.S. Treasury Department, said she didn’t believe crypto “played a direct role” in the failure of either Signature or Silicon Valley Bank:

“I know that Signature had activities involved in digital assets, but I don’t believe that is the main [cause].”

The March 29 hearing marked the second time that Liang, Gruenberg, and Fed Vice Chairman for Supervision Michael Barr addressed lawmakers following the collapse of three major banks in the United States. The Senate Banking Committee held a hearing on March 28, in which Gruenberg said Silvergate Bank had not adequately managed risks that led to its failure.

Though some lawmakers and regulators have seemingly pointed to the banks’ ties to digital asset companies, many have criticized the association as being without merit. Former House of Representatives member and Signature board member Barney Frank has said that officials wanted to send a “very strong anti-crypto message,” claiming that the bank had no issues with solvency at the time of its closure.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Stablecoins are solution to crypto’s banking problem, exec says

Stablecoins are seen as a potential solution to crypto’s banking problem, but some of them are currently not immune to banking issues.

The collapses of banks like Silvergate have certainly impacted cryptocurrency exchanges but there are ways for the industry to survive without the support of banks, one executive believes.

Crypto exchanges significantly rely on traditional banking systems for customer deposits, which makes them vulnerable to various banking issues, according to Bitstamp USA CEO and global commercial officer Bobby Zagotta.

The executive believes that stablecoins — cryptocurrencies whose value is tied to fiat currencies or other assets — could be a solution to crypto’s banking problem.

“We are currently discussing how stablecoins can offer us an alternative to traditional banking,” Zagotta said in an interview with Cointelegraph on March 27. He added that stablecoins could potentially unlock new capabilities for the industry, allowing it to look at banking from a new perspective and to go back to the genesis and purpose of crypto, adding:

“One of the founding principles of our industry is to enable individuals to transact without dependence on third-party institutions, so there are other possibilities to be explored, such as the use of stablecoins to reduce frictions born of the banking system.”

According to Zagotta, stablecoins provide many benefits like faster and more cost-effective transactions, reduced reliance on banks and increased liquidity. “Depending on regulations it’s possible we will see a continued evolution and integration of stablecoins within exchanges amid the banking crisis,” the exec stated.

In the interview, Zagotta emphasized that the crypto industry needs to figure out the factors that led regulators to step in at Signature bank. That is necessary for the industry to ensure that crypto-friendly banks are operating in a safe and sustainable manner moving forward. He also cautioned exchanges against creating more risk for customers by hastily moving customer funds around different U.S. banks that may be stressed or at risk.

According to the exec, Bitstamp currently has 15 banking partnerships globally, including U.S. banks like Customers Bank and MVB Bank, as well as European banks like LHV Bank and Gorenjska Banka that can process payments in USD as well. “We are also in conversations to onboard United Texas Bank, Western Alliance Bank, Axos Bank, and Cross River Bank to ensure we maintain a robust network in the midst of all of this change,” Zagotta added.

While Bitstamp is looking at stablecoins as a potential solution to crypto’s banking problem, it’s worth noting that some major stablecoins like USD Coin (USDC) aren’t immune to banking problems themselves. USDC issuer Circle faced major issues in March due to its $3.3 billion exposure to the collapsed Silicon Valley Bank (SVB). The events caused USDC to briefly lose its 1:1 peg with the U.S. dollar.

According to media reports, the banking crisis has been subsiding over the past few weeks but isn’t close to being over. According to José Manuel Campa, the head of the European Banking Authority, European banks have remained vulnerable following the demise of SVB and the subsequent emergency rescue of Credit Suisse by UBS.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Traditional banks rely on ‘tiny buffer’: Paris Blockchain Week 2023

Signature Bank is the best place for crypto banking, even if it goes bankrupt, Woorton co-founder Zahreddine Touag believes.

The first day of Paris Blockchain Week (PBW) is providing more thoughts on the ongoing crisis in the global banking system, with industry executives comparing the collapses of major cryptocurrency firms like FTX with the fall of banks like Silicon Valley Bank (SVB).

On March 22, PBW hosted a panel discussion titled “FTX, Luna, Celsius, 3AC: From Hero to Zero,” bringing together industry executives from the blockchain venture firm Node Capital, crypto-friendly Six Digital Exchange, Delta Growth Fund and crypto liquidity provider Woorton. The panel took place on PBW’s Mona Lisa stage.

*The FTX, Luna, Celsius, 3AC: From Hero to Zero panel at the Paris Blockchain Week. Source: Livestream*

According to Woorton co-founder and head of trading Zahreddine Touag, the FTX and Celsius-related meltdown in the crypto industry has been triggered by different reasons than those that fueled the ongoing banking crisis.

“It’s lack of due diligence from the investors, lack of risk management from the players,” Touag said, referring to collapses like FTX. He noted that investors often don’t realize risks of holding their crypto assets, mistakenly thinking that regulated platforms are protected from losses, stating:

“If you get regulated in France, you just have to do KYC and AML. When you do KYC, AML, it doesn’t protect you from losing the money. It does not at all. And in a lot of countries, a lot of people think that being regulated is being protected.”

There are also many other reasons, like greed, especially seen among young and inexperienced investors, Touag said. According to the exec, the FTX and Celsius contagion is still not over and industry players are still looking at each other, wondering who is impacted or not. “Many are impacted and we don’t know. So for the next few months, there will be more news,” he stated.

Unlike crypto collapses, the ongoing global banking issues were mainly driven by the fragility of the whole model of traditional banks, according to Touag.

“Some people are aware, but not everyone is aware that this fractional reserve system with the banks makes it very fragile,” the Woorton executive stated, adding that banks only have about 12% of their funds liquid. He said:

“The trillions they say they have on their books, they don’t have it. It’s elsewhere. It’s invested, it’s in the market, but they don’t have it. So they rely on this tiny buffer, 12%.”

Touag added that troubled banks like SVB often depend on jurisdictions in Europe and the United States, while relying on this “tiny buffer” and expecting that “no one will pop up at the store asking for money.” According to Touag, it’s the same story with bigger banks like Morgan Stanley or JPMorgan, but people keep thinking that they are “too big to fail.”

“That’s what happened with SVB,” Touag said, adding that Silvergate’s issue was “a bit different.” He also argued that Signature’s crisis is “another story, because the bank is not closed.” Touag stressed that Signature was just taken over and that his company used Signature the morning of this discussion. He added:

“In the crypto banking system, the best place to bank is Signature. Why? Because the regulator said that they will make every single depositor whole. So, we know that our money is safe there; even if they go bankrupt, our money is saved.”

As previously reported, the New York State Department of Financial Services took over Signature on March 12, appointing the Federal Deposit Insurance Corporation as the receiver. According to Barney Frank, a former member of the U.S. House of Representatives, the regulators took action against Signature despite no insolvency.

Yellen defends government intervention to avoid another SVB

The U.S. Treasury Secretary Janet Yellen said the federal government would intervene if necessary to protect other small lenders.

Nearly two weeks after three United States banks collapsed — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — U.S. Treasury Secretary Janet Yellen said the federal government is ready to take action if needed.

According to a Bloomberg report of excerpts from a speech Yellen will give on Tuesday at the American Bankers Association in Washington D.C., the Treasury Secretary said:

“Our intervention was necessary to protect the broader US banking system, and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

Yellen is set to defend recent measures taken by the government to defend the banks and the greater economic impact of the situation, calling the government actions “decisive and forceful actions.”

Additionally, Yellen said the government intervention helped to maintain the “important role” of small and mid-size lenders in the U.S. economy.

“The Treasury is committed to ensuring the ongoing health and competitiveness of our vibrant community and regional banking institutions.”

U.S. regulators began swiftly working on a plan following the banking crisis, during which Yellen initially said no bailout would be necessary. Instead, the regulators guaranteed insured and uninsured deposits at both SVB and Signature. The U.S. Federal Reserve also launched a new way to help lenders cover withdrawals.

A meeting has been announced by Congress, scheduled for March 29, which will delve into the failures of SVB and Signature Bank.

U.S. President Joe Biden said he is “firmly committed” to holding whoever was responsible for the recent collapses accountable. Biden also stated that shielding depositors involved with SBV and Signature will be at “no cost to the taxpayer.“

The Department of Justice and the Securities and Exchange Commission have both reportedly opened inquiries into the incident. Meanwhile, economists have analyzed that over 186 banks in the U.S. are well-positioned for collapse.

Coinbase pauses support for Signature Bank’s Signet: Report

The U.S. crypto exchange was reportedly looking for another payment network provider and waiting on the outcome of the situation with Signature.

More than a week after New York regulators closed the crypto-friendly Signature Bank, Coinbase has reportedly stopped support for the institution’s Signet payment platform.

According to a March 20 report from The Wall Street Journal, Coinbase users won’t be able to use Signet to send funds outside of banking hours until further notice. The crypto exchange was reportedly looking for another payment network provider and waiting on the outcome of the situation with Signature.

The crypto-friendly bank was the third domino to fall following the failure of Silvergate Bank on March 8 and Silicon Valley Bank on March 10. Though financial regulators claimed they stepped in to “protect the U.S. economy by strengthening public confidence in our banking system,” reports have suggested that Signature had no issues with solvency at the time of its closure on March 12.

The U.S. Federal Deposit Insurance Corporation announced that the bank’s deposits and loans — with the exception of roughly $4 billion in crypto deposits — would be sold to New York Community Bancorp’s Flagstar Bank. The government corporation said it planned to provide crypto deposits “directly to customers” with a digital banking account.

Today, we entered into an agreement with a subsidiary of New York Community Bancorp, Inc., to purchase and assume deposits and assets out of Signature Bridge Bank. Read more ➡️ https://t.co/bSshY93lBh. pic.twitter.com/b9RBvYtGF7

— FDIC (@FDICgov) March 19, 2023

Coinbase, Celsius and Paxos all had funds tied to Signature at the time of the bank’s closure. Coinbase said it expected $240 million in corporate assets to be “fully recovered,” Paxos reported $250 million held at the bank, and Celsius announced some exposure but not the exact amount.

The United State House Financial Services Committee will be conducting a hearing to explore the failures of Silicon Valley Bank and Signature Bank on March 29. FDIC chair Martin Gruenberg and Fed Vice Chair for Supervision Michael Barr are expected to testify.

In the aftermath of banks’ horrorshow: Law Decoded, March 13–20.

A week after the twinning collapse of Silicon Valley Bank (SVB) and Signature Bank, and the trouble at Credit Suisse, the dust is slowly settling down.

A week after the twinning collapse of Silicon Valley Bank (SVB) and Signature Bank, and the trouble at Credit Suisse, the dust is slowly settling down. SVB Financial Group has filed a voluntary petition for a court-supervised reorganization under Chapter 11 in the United States Bankruptcy Court. The company is no longer affiliated with Silicon Valley Bank, which operates under the jurisdiction of the Federal Deposit Insurance Corporation (FDIC) and is not included in the Chapter 11 filing. Meanwhile, the United Kingdom arm of the bank was acquired by HSBC for 1 British pound.

Congress announced a hearing into the failures of SVB and Signature Bank, which will take place on March 29. FDIC chair Martin Gruenberg and Federal Reserve vice chair for supervision Michael Barr are expected to appear before lawmakers to help them understand the nature of the current crisis.

The Mid-Size Bank Coalition of America (MBCA) asked United States federal regulators to extend insurance on all deposits for the next two years. According to the coalition, extending insurance on “all deposits” would “immediately halt the exodus” of deposits from smaller banks and stabilize the industry. This sounds pretty logical, given that more than 186 U.S. banks are well-positioned for collapse from the economists’ point of view.

Wyoming enacts bill to defend private keys

Governor Mark Gordon of the U.S. state of Wyoming signed a bill preventing the forced disclosure of private keys to protect the privacy of digital asset owners. ourts in Wyoming will no longer compel individuals to provide access to any private keys that grant access to their digital assets, digital identity or any other interests or rights to which the private key provides. The only exception to this law applies when individuals are required to disclose the ownership or transfer of crypto during any lawful proceeding.

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Binance-Voyager deal to proceed without holdings

The United States District Court for the Southern District of New York declined the U.S. government’s reasonings for halting the acquisition of bankrupt brokerage company Voyager Digital by Binance.US. According to Judge Michael Wiles, any protractions with the deal will harm the interests of Voyager’s former clients, who are waiting for the return of their funds. Thus, Wiles realleges his prior approval of Voyager Digital’s Chapter 11 bankruptcy plan, which suggests selling billions of dollars in assets to Binance.US to regain liquidity to pay back customers.

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Euro Parliament approves Data Act

The European Parliament passed the Data Act, intended to “boost innovation by removing barriers obstructing access to industrial data.” The legislation established rules for fairly sharing data generated by “connected products or related services,” such as the Internet of Things and “industrial machines.” The act also granted smart contracts equal protection compared with other forms of contract, which is bad for the industry, as it would undermine immutability guarantees.