New York regulators on Sunday shut down Signature Bank, one of the most popular targets of cryptocurrency firms in the United States.
"All depositors of the institution will be fully compensated," the US Treasury Department, the Federal Reserve and the Federal Insurance Corporation said in a joint statement.
It was the bank's third major failure in a week that spooked investors.
The joint statement protecting depositors with more than $250,000 in FDIC-insured deposits aims to reassure bank customers that their funds will not be frozen.
As of December 31, 2022, Signature Bank had approximately $88.59 billion in deposits. The New York Treasury Department took over the bank.
Signature Bank is one of two widely used banks in the cryptocurrency industry. Similar to Silvergate, which collapsed on March 8, Signature Bank has a network that allows cryptocurrency companies to transfer dollars in real time. And with the collapse of two cryptocurrency banks, it may be difficult to return to the dollar.
Cryptocurrency exchange Coinbase stated in a tweet that it has $240 million in cash in Signature Bank, but since the funds are being held, Coinbase will use other banking partners for customer transactions.
In addition, all insured depositors announced by the Federal Reserve (Silicon Valley Bank) will have full access to their insured deposits.
This is good news for cryptocurrencies, as stablecoin provider Circle has $3.3 billion in reserves there. Circle operates a $1 perpetual token, which is an essential component of cryptocurrency payments.
The regulator said in the statement that depositors of Silicon Valley Bank, a non-crypto bank that collapsed on March 10 after unusual withdrawals, will be able to withdraw unsecured deposits on Monday. In both cases, no tax loss will be paid, the statement said.