What impact does the closure of Signature, the last crypto-friendly bank in the U.S., have on the market?
TechFlow Selected TechFlow Selected
What impact does the closure of Signature, the last crypto-friendly bank in the U.S., have on the market?
What caused Signature Bank to be shut down by regulators, and what impact will this have on future market trends?
Navigating Web3 tides with focused insightsOn the evening of March 12, Eastern Time, the U.S. Department of the Treasury announced that the New York State Department of Financial Services had closed Signature Bank, with customers allowed to apply for withdrawals starting Monday. The key similarity between this incident and the recent collapses of Silvergate Bank and Silicon Valley Bank lies in their involvement in cryptocurrency-related businesses.
Signature Bank, previously the only bank temporarily spared from a liquidity crisis caused by customer panic withdrawals, was abruptly shut down by regulators—sparking market shock. What exactly led to the regulatory shutdown of Signature Bank, and what implications does this have for future market trends? Based on currently disclosed information, this article analyzes the potential reasons behind the closure and its impact on the market.
Founded in 2001, Signature Bank (SBNY) primarily focused on private banking services for high-net-worth individuals. Starting in Q1 2018, SBNY began expanding into crypto-related services, offering fiat banking access to regulated stablecoin issuers, exchanges, custodians, cryptocurrency miners, and institutional traders. According to its previous annual report, as of the end of 2022, the bank held $110.3 billion in total assets and $88.5 billion in customer deposits (liabilities).
From a liability perspective, after the FTX collapse in Q4 2022, SBNY management actively reduced exposure to crypto-related risks by lowering business exposure, decreasing customer deposits by $12.9 billion. By the end of Q4 2022, crypto-related customer deposits stood at $17.7 billion, accounting for 20% of total customer deposits.
From an analysis of balance sheet concentration, this level of business exposure is relatively reasonable.
In terms of service scope, SBNY does not engage in investing, holding, or custodying cryptocurrencies. Its operations are limited to U.S. dollar deposit services, which can facilitate 24/7 real-time USD transfers via its internally developed Signet system.
Unlike Silvergate Bank, SBNY does not offer lending services collateralized by cryptocurrencies, making its business approach more conservative. In early March, SBNY disclosed financial data for Q1 2023 showing total customer deposits of $82.6 billion, with crypto-related deposits amounting to approximately $14.4 billion, or about 17.43%. The decline in deposits was primarily due to a $15.1 billion reduction in crypto-related client deposits—driven both by inherent volatility in the cryptocurrency market and SBNY’s intensified efforts to cap the proportion of crypto-related deposits.
From an asset perspective, SBNY's disclosed capital adequacy ratios show a Common Equity Tier 1 ratio of 11.20%, a Risk-Based Capital ratio of 12.32%, and a leverage ratio of 8.79%, all meeting Basel III requirements for bank risk assets. Overall asset health remains sound. Detailed asset breakdown shows $17.4 billion in short-term investments, representing 14.98% of total assets. Even under extreme scenarios where all crypto-related deposits were withdrawn simultaneously, liquidity would still be sufficient.
In terms of business health, if Silvergate Bank can be considered a risk-aggressive "bad student," then Signature Bank could be seen as a well-behaved "good student"—compliant with regulations and promptly adjusting its business focus in response to market shifts.
Therefore, based on fundamental analysis, Signature Bank should not have faced direct liquidity run risks solely due to the cryptocurrency market. However, given the U.S. Treasury's observation of the severe negative market impact caused by Silvergate—the most aggressive crypto-friendly bank—under rising interest rates, it may have decided prudently to shut down Signature Bank. This action likely stems from two considerations:
-
First, concerns that volatility in crypto-related operations might spill over to affect other clients of Signature Bank and subsequently spread into the traditional banking sector, especially considering SBNY's significant overall scale;
-
Second, in light of ongoing discussions among U.S. institutions—including Congress, the Federal Reserve, the Treasury Department, SEC, and CFTC—about establishing regulatory frameworks for the crypto industry, this move may signal disciplinary action against banks already involved in crypto activities, and indicate an upcoming comprehensive and prudent regulatory framework. Future regulations will inevitably cover every aspect—from within the crypto market itself to transmission channels between crypto and traditional financial markets—with thorough, deep, and robust oversight measures.
Regarding Silvergate Bank and Silicon Valley Bank, as previously discussed in my reports, both suffered liquidity crises triggered by massive customer runs amid distrust, resulting from unstable liabilities (deposits) and unrealized losses on long-term bonds in an environment of rising interest rates.
As such, market speculation suggests the Federal Reserve may slow rate hikes at its upcoming FOMC meeting, with current odds of a 50-basis-point hike dropping to zero. U.S. equity futures rose slightly, while distrust in stablecoin-to-fiat trading pairs contributed to a concurrent rise in crypto markets. Nevertheless, with crypto regulations still undetermined and CPI data imminent, claims that the crypto market has entered a new bull cycle may be premature.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
