On March 12, Superintendent Adrienne A. Harris announced that Signature Bank, a popular bank with cryptocurrency companies, has been officially closed down by the New York Department of Financial Services (NYDFS) due to 'systemic risk'. The closure comes after Section 606 of New York Banking Law was enacted, giving the regulator the power to take possession of Signature Bank and appoint the Federal Deposit Insurance Corporation (FDIC) for the insurance process.

With deposits of $88.59 billion as of December 31, 2022, Signature Bank is one of the two major US destinations for cryptocurrency companies. The FDIC will handle the insurance process to ensure all depositors receive their funds. However, concerns have been raised among investors, as this is the third major bank to collapse within a week.

According to a statement released by the Federal Reserve on the same day, the decision to close the bank was made in conjunction with the FDIC to strengthen public confidence in the banking system and protect the US economy. A senior member of the US Treasury also reportedly told the press that the actions taken by NYDFS and Federal Reserve were aimed to limit depositor outflows and prevent bank runs.

Silvergate, the other prominent crypto-friendly bank, announced on March 8 that it would shut down and voluntarily liquidate "in light of recent industry and regulatory developments."

Despite the turmoil in the crypto market, analysts believe that Signature Bank's diversified depositories, which only contain 25% of crypto deposits, allowed it to withstand the FTX collapse storm.

In conclusion, the closure of Signature Bank has raised concerns among investors about the stability of the banking system, especially in light of the recent closures of other major banks. While the decision was made to protect the US economy and prevent bank runs, it remains to be seen what impact it will have on the cryptocurrency market and its investors.

Pavan A

CBW - External Analyst

INDIA