Woodmere, N.Y.: Photo of a branch of Signature Bank in Woodmere, New York on March 13, 2023. Regulators announced that the New York-based bank had failed and was being seized. Signature Bank is the third-largest bank failure in U.S. history with more than $110 billion in assets. (Photo by Howard Schnapp/Newsday RM via Getty Images)
Newsday via Getty ImagesSignature Bank’s crypto customers are getting the boot as the Federal Deposit Insurance Corp. (FDIC) says depositors whose accounts were not included in the Flagstar Bank sale have until April 5 to close their accounts, giving them just one week to find new banking partners.
“If the customers with deposits not assumed by Flagstar Bank have not moved their money by then, the FDIC will mail a check to their address of record,” David Barr, deputy director of communications at the FDIC, said in an emailed note to Forbes.
Signature was one of two main banks that allowed customers to transfer conventional funds to and from the cryptocurrency world. It was closed on March 19 after runs on Silicon Valley Bank and crypto-centric Silvergate Bank and that reflected depositor unease with the safety of financial institutions exposed to the digital-asset and venture-capital sectors.
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The closure of Signature and the sale of most of its business was accomplished quickly, and the exclusion of its crypto operations lends credence to the idea that the government was sending a message to banks to stay away from digital assets. That raises the question of what the FDIC will do with Signet, the transfer system that bridged the crypto and traditional finance worlds. Signet and a similar service from Silvergate accounted for the bulk of that business.
Signet is “left behind in the receivership and the FDIC will market it,” says Barr, though he did not disclose if any potential buyers have expressed interest.
About $4 billion in digital assets-related deposits were excluded from the sale to Flagstar, a New York Community Bank subsidiary, alongside $11 billion in commercial debt for rent-stabilized apartments in New York City and $27 billion of loans to venture-capital and private-equity firms.
While Signature’s crypto customers were aware since the sale that they would have to look for other banking partners, the relatively short time frame was only revealed to customers yesterday.
“We have alternative options available to us, and we are in the process of developing new banking relationships as well,” says Charlie Schumacher, vice president of corporate communications at Marathon Digital. The bitcoin miner had $142 million of cash deposits in its Signature account.
Public cryptocurrency exchange Coinbase
“Coinbase, nor its customers, have lost any funds in this specific banking failure,” a source familiar with Coinbase’s banking strategy told Forbes, adding that the company had already started looking for alternative banking options after Signature’s crypto customers were not part of the sale.
Paxos had $250 million in its account at the time of Signature’s closure. It has not responded to Forbes’ request for comment on the status of those funds.
Crippled crypto lender Celsius
