Nonetheless, Coinbase anticipated the full recovery of its cash and stated that it had over 240 million dollars in corporate funds held at Signature Bank.
Following the closure of Signature Bank by the Treasury, several cryptocurrency companies, including Paxos, have acknowledged the extent of their engagement with the financial institution.
During an unprecedented week in which several financial institutions were brought to their knees, the Federal Reserve, the Treasury, and the FDC all concluded that Signature Bank should be shut down.
The decision was reached by consensus to avoid a further exodus of depositors and any further escalation of the financial crisis.
According to a statement released (1) by the NYFDS, Signature bank was a potential threat to the overall financial system. As a result, it was closed to protect the economy of the US and the funds of depositors.
The Federal Deposit Insurance Corporation (FDIC), appointed as the receiver of the Signature Bank, has moved all of the assets and cash of the Signature Bank to a Signature Bridge Bank. As a direct result, customers will be able to withdraw any funds they have stored in the bank.
Stuck Liquidity
As of the end of December, the entire amount of money on deposit at Signature Bank was $82.6 billion. After the news, Paxos made another declaration, this time stating that the company had $250 million in the bank.
Notwithstanding this, the company assured its clients that the monies would be returned thanks to the preventative measures implemented by the government.
Similarly, Paxos claimed (2) that the company owned supplementary insurance for amounts that were more than those covered by the basic FDIC insurance.
Coinbase also disclosed (3) that it has approximately 240 million dollars in corporate money held in Signature Bank, although the company anticipates the complete recovery of all of its cash.
As of close of business Friday March 10 Coinbase had an approximately $240m balance in corporate cash at Signature. As stated by the FDIC, we expect to fully recover these funds. https://t.co/XY5L7m4RMs
— Coinbase 🛡️ (@coinbase) March 12, 2023
Also, it was mentioned by the Celsius Official Committee of Unsecured Creditors. This organization no longer represents Celsius’s creditors, and some of the company’s money was kept at Signature Bank.
Because the bank was closed, other businesses, including Immutable X, Theta Network, Crypto.com, and Tether, were keen to point out that they had no exposure to the financial institution.
The Repercussions of the Closing of Signature Bank on the Cryptocurrency Ecosystem
Due to the bank being closed over the weekend, BUSD, Circle, and DAI all lost their dollar pegs.
In addition, Circle’s minting and redemption program could not be processed. The company will continue to handle all of its financial transactions through BNY Mellon after they have transferred its funds to that institution.
Curiously, Bitcoin and Ether experienced approximately a 10% price increase after the announcement that the government would intervene in the market.
In addition, the government announced a program with a budget of $25 billion to assist financial institutions in dealing with shortages of liquidity brought on by challenging times.
During the course of history, actions of this kind have consistently been beneficial to crypto and other risky asset classes.