While releasing an official declaration, the Federal Reserve said that this step has been taken to avoid a similar systematic risk to that of the Silicon Valley Bank and protect its customers.
The sudden collapse of Signature Bank would be another blow to the crypto industry as the bank had significant ties with leading crypto businesses. The Signature Bank and Silvergate were key facilitators for faster transactions for crypto businesses and exchanges, assuring adequate liquidity in the digital asset markets.
According to the official declaration released by Superintendent Adrienne A. Harris, the decision was taken by the US regulators to avoid more bank runs in the country, protect the economy, and strengthen the trust in the US banking system. The declaration also ensured that even though all the depositor funds would be available for withdrawals, the taxpayers would not have to pay for these financial blunders.
The declaration also highlighted that this cover would not include unsecured debt holders of the bank with the senior management already removed from the operations. As per the records, the Signature bank held more than $80 billion in its treasury and could withstand the FTX fiasco due to diversification in its customer base. Around $16.5 billion of the total funds of Signature Bank were related to cryptocurrencies even after the bank started to step back from crypto.
The Fed also said that it would be working towards making additional funds available for ‘eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.’ The message has been clear from the regulators that they are willing to extend their limits to secure the depositors in the US banking system. However, time will tell how impactful these steps are going to be in the times to come.
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