The recent news of Signature Bank and Silicon Valley Bank (SVB) facing operational difficulties has caused a stir in the American financial sector. In response, the Federal Reserve has closed them down and is now looking for bidders to acquire the troubled institutions. However, any prospective bidder of Signature Bank must agree to give up all cryptocurrency forays at the organization. This is due to the fact that multiple crypto-related firms used Signature’s services, including Coinbase and Paxos, and have been affected by the closure.
The closure of SVB has also caused concern, with Circle admitting that $3.3 billion of its cash reserves were stuck in the bank. This led to the stablecoin USDC depegging from its dollar value to as low as $0.87. PNC Financial Services and the Royal Bank of Canada have explored the option to acquire Silicon Valley Bank, but SVB may file for bankruptcy protection to sell its remaining assets.
The US Department of Justice and the Securities and Exchange Commission have also been investigating whether Signature Bank took necessary measures to combat money laundering by monitoring transactions. President Joe Biden has assured taxpayers that the money will come from fees that banks distribute into the Deposit Insurance Fund and that the domestic banking system is safe. However, entities and investors exposed to the bank will lose their assets.