As volatility grips the digital asset sector, it has been reported that Signature Bank, a prominent US financial institution, will reduce the dollar amount of deposits linked to cryptocurrencies by approximately $10 billion.
23% Of Deposits Targeted
At an investor conference in New York on Tuesday, the bank’s Chief Operating Officer (COO), Eric Howell, made a hint about the imminent change. Over 23% of Signature’s $103 billion in customer deposits as of November 2022 are monies connected to cryptocurrency holdings. The company’s ultimate goal, according to the COO, is to reduce the ratio to between 20% and 15%.
Howell made it clear that by cutting back on its exposure to cryptocurrencies, Signature would withdraw between eight and $10 billion in deposits from the erratic market. Notably, the bank had as a client the insolvent FTX crypto exchange, even though the crypto exchange’s deposits made up less than 0.1% of the bank’s total deposits.
Additionally, stablecoin businesses account for a substantial amount of Signature’s cryptocurrency asset business, but the corporation now thinks that investing in them is useless.
CEO Joe DePaolo said;
“We recognize that in certain cases, especially as we look at stablecoins and other parties in that space, there’s a better way for us to utilize our capital”.
One of the few regulated US banks, according to the Financial Times, Signature, has accepted significant crypto deposits from customers, stablecoin issuers, and Bitcoin miners. The plan assisted the company in tripling cash inflow from $33 in 2017.
Navigating a Troubled Industry
This move by signature was preceded by reports of crypto companies laying off staff, freezing withdrawals, and trying to stem losses, this raised questions about the health of the ecosystem. The turbulence persisted with Coinbase cutting 18 percent of its employees, after layoffs at other crypto companies like Gemini, BlockFi, and Crypto.com.
High-profile start-ups like Terraform Labs also imploded, wiping away years of investments while crypto bank, Celsius, abruptly halted withdrawals.
All these events came before the industry was shaken to its core by the FTX bankruptcy. What happened to FTX has pegged the industry back according to many experts because it will take time before trust is restored.
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