Signature Bank Collapse: Coinbase, Paxos Disclose Massive Exposure

Signature Bank became the third US bank institution to collapse in the span of four days. Similar to the now-collapsed Silvergate Bank, it also had a large corporate customer base from the cryptocurrency industry. The other one, Silicon Valley Bank (SVB), mostly tapped the technology sector, including crypto firms.

Signature Bank Collapses

New York state regulator, the Department of Financial Services, shuttered Signature Bank on Sunday "to protect depositors," putting it under the Federal Deposit Insurance Corporation (FDIC) receivership.

The FIDC also took control of the SVB, but Silvergate Bank declared voluntary liquidation and did not seek the FIDC receivership. Though FIDC protects banking deposits, it only covers up to $250,000. This limit falls significantly short when it comes to corporate clients.

According to the New York Department of Financial Services (DFS), Signature Bank had total assets of about $110.36 billion and total deposits of around $88.59 billion by the end of 2022.

The bank had nine business lines, including commercial real estate and digital assets banking. Almost a quarter of its savings came from the cryptocurrency industry in the quarter ending in September. However, crypto deposits shrunk to around $8 billion by the end of December.

Though the US government was initially against bailing out the two banks, SVB and Signature, it announced the protection of all depositors of both banks on Sunday. As highlighted, the move is to "protect the US economy by strengthening public confidence in our banking system."

"We are also announcing a… systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole… [and]... no losses will be borne by the taxpayer," Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chairman Martin Gruenberg said in a joint statement.

@federalreserve @USTreasury @FDICgov issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors' savings remain safe: https://t.co/YISeTdFPrO

Crypto Companies' Exposure to Signature Bank

Meanwhile, many major cryptocurrency companies voluntarily disclose their exposure to Signature Bank. It includes Coinbase, Paxos, and now-bankrupt Celsius. However, many crypto firms also denied any exposure to the collapsed bank.

Paxos Has $250 million Exposure to Signature Bank

Stablecoin issuer Paxos has $250 million in deposits with Signature Bank. The crypto company added that it held private insurance covering the deposits beyond the FIDC protection.

"Seeking private deposit insurance is part of our conservative approach to managing customer assets exceeding FDIC insurance limits," Paxos stated. "Paxos maintains relationships with multiple leading global banks and are always looking to expand our network of banking partners."

Paxos currently holds $250M at Signature Bank and holds private deposit insurance well in excess of our cash balance and FDIC per-account limits. Seeking private deposit insurance is part of our conservative approach to managing customer assets exceeding FDIC insurance limits.

$240 million Exposure of Coinbase

Coinbase, the largest cryptocurrency exchange in the US, revealed a $240 million deposit with Signature Bank. However, the exposure did not affect Coinbase's operations, as the exchange currently processes transactions through other banking partners.

"Despite the turbulence we have seen in the traditional banking sector recently, Coinbase continues to operate as usual. At Coinbase, all client funds continue to be safe and accessible, including USDC conversions which will resume on Monday," Coinbase added.

All client cash at banks continues to be protected by FDIC pass-through insurance. Due to FDIC's hold on Signature’s transactions, we’re currently facilitating all client cash transactions with other banking partners.

Meanwhile, with the turbulence in the banking industry, Coinbase stocks tanked more than 17 percent last week. However, the investors' sentiment toward the crypto exchange exposure will be revealed when the US markets open on Monday.

More Troubles for Bankrupt Celsius

The Celsius Official Committee of Unsecured Creditors, a body that sees the interest of the depositors of now-bankrupt crypto lending platform Celsius, also revealed exposure to Signature Bank but did not disclose the amount.

Today the US government announced the closure of Signature Bank where Celsius held some of its funds. All depositors will be made whole, per US Gov. Celsius and the UCC are evaluating the situation and will provide further updates. Announcement here: https://t.co/v5GSvTL7JY

Signature Bank ran Signet, a blockchain-based real-time payments system available around the clock, which was used by a large chunk of crypto companies, including Coinbase and Circle. Now, that infrastructure is not available anymore.

Safe Crypto Companies

However, several crypto companies further came out clean with their exposure to Signature Bank. Circle, which has $3.3 billion of its stablecoin reserves deposited with SVB, has no exposure to Signature Bank. Crypto.com and Tethe also confirmed that they do not hold any deposits or have any lending exposure with the collapsed New York bank.

https://t.co/pFc4Pz9nFR has $0 exposure to Signature Bank. https://t.co/TG2h7HyXE9

OKCoin Lost USD Deposit Infrastructure

The Chief Executive of OKCoin, an affiliate crypto exchange of OKX, confirmed that the platform has temporarily lost its USD deposit infrastructure with the collapse of Signature Bank. The crypto exchange was using Signet for its fiat deposits.

It's been a wild week. Silvergate. SVB. Now Signature. We had no exposure to SVB (or any of the previous blow-ups)We managed Silvergate situationSignature IS our primary USD bank for customer transactions. So this Sunday news did have some short-term implications👇

"Our team are working very hard on alternative channels and solutions in real-time," OKCoin CEO, Hong Fang continued in the tweet. "We've been through much worse times since our inception. If this weekend has told us anything, it's the significance of the future that we are building."