Crypto Firms Are Dropping Silvergate Bank, But Is Signature Bank Better?

Coinbase Global (NASDAQ: COIN) dropped Silvergate Capital (NYSE: SI) as a partner for Prime customers on Thursday, with many crypto firms following suit.

Moving forward Coinbase will be facilitating withdraws and deposits of US Dollars through that of Signature Bank (NASDAQ: SBNY), with the changes said to be effective immediately. The changes were identified in a notice sent to Prime customers by Coinbase, asking its clients to update payment instructions as a result of the decision.

This followed immediately after Silvergate reported that its ability to continue as a going concern is threatened by liquidity issues.

Soon after, Signature released a mid-quarter update as of March 1, 2023–top billed by a report that spot deposit balances are lower by approximately $826 million.

Average deposit balance quarter-to-date came in at $88.79 billion, which is lower than the fourth quarter 2022 quarter-to-date average balance of $98.6 billion.

Twitter user Cryptadamist qualified Signature’s update, annotating on the release saying the bank recorded lower deposit balances despite spending “last 2 earnings calls talking about raising new deposits.”

Signature over Silvergate?

Growing concerns relay that the shift to Signature from Silvergate might not prove to be the wisest decision. For one, Signature is included as a defendant in the newest class action complaint against failed crypto exchange FTX.

Fellow crypto exchange Kraken is also withdrawing from using crypto-focused bank Signature Bank for some key financial operations.

According to Bloomberg, Kraken stated in an email to users that the adjustment was done owing to Signature revisions. Signature indicated in an email to CoinDesk that as of Feb. 1, it would no longer assist any of its crypto exchange customers in buying and selling amounts less than $100,000.

This follows after Signature announced in December that it will reduce, but not eliminate, its exposure to the cryptocurrency business.

It is also worth noting that Signature’s CEO Joseph DePaolo has suddenly resigned “under a cloud of money laundering/fraud-related” concerns.

Observers argue that even if crypto exchanges shift to Signature, once Silvergate capsizes following its liquidity problems, the faith in so-called “crypto-friendly banks” would collapse. This could then set a dangerous precedent for crypto investors to massively pull out their assets from these banks since exchanges won’t accept transactions from them anymore.

Silvergate is said to be “currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”

Information for this briefing was found via Edgar, CoinDesk, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply