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Coinbase announced that it has approximately $240 million of enterprise funds in Signature Bank, but expects a full recovery of all funds.
Several crypto firms, including Paxos, have disclosed their level of engagement with Signature Bank following the latter’s closure by the Ministry of Finance.
Following an unusual week in which multiple banks failed, the Federal Reserve, Treasury and FDC agreed to close Signature Bank. Decisions were taken jointly to prevent further depositor outflow and prevent further financial crises.
According to the NYFDS statement, Signature bank is a systemic risk. Therefore, it was closed to protect the US economy and protect depositors’ funds. As the appointed beneficiary, the FDIC has transferred all Signature Bank funds and assets to the Signature Intermediary Bank. As a result, depositors will be able to receive the funds they have in the bank.
Stuck Liquidity
As of December, Signature Bank had total deposits of $82.6 billion. Following the announcement, Paxos announced that it’s holding $250 million in the bank. However, the company assures customers that funds will be recovered due to the protective measures taken by the government.
Similarly, Paxos adds that they have additional insurance coverage for amounts that exceed FDIC insurance standards. Likewise, Coinbase announced that he has about $240 million of corporate funds in Signature Bank, but expects a full recovery of all of his funds. A body representing Celsius’s creditors (Celsius Official Committee of Unsecured Creditors) also noted that some of his funds were held in Signature Bank.
Other companies such as Immutable X, Theta Network, Crypto.com, and Tether have been quick to record their non-exposure to banks because of the shutdown.
Effects of Signature Bank Closing on the Crypto Ecosystem
Following the bank closures, BUSD, Circle, and DAI lost their dollar pegs over the weekend. In addition, Circle is unable to process its print and exchange programs. The company transferred its funds to BNY Mellon and will continue to make settlements through them.
Interestingly, Bitcoin and Ether were up almost 10% after the Federal Government announced the intervention. The government also announced a $25 billion program to help banks overcome liquidity shortages during a volatile period. Historically, such moves have always helped cryptocurrencies and other speculative asset classes. Looks like the effect won’t be any different this time.
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A seasoned writer with practical experience in the fintech industry. When not writing, he spends his time reading, researching or teaching.
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