Back in December, Signature Bank signaled it would reduce the deposits from digital asset players following the crypto crash. Now it is also restricting payment transactions where it acts as an onramp and offramp, sending and receiving fiat payments for cryptocurrency exchanges. That’s according to the largest exchange Binance. The move is surprising, given comments made during Signature’s earnings call last week.
“One of our fiat banking partners, Signature Bank, has advised that it will no longer support any of its crypto exchange customers with buying and selling amounts of less than 100,000 USD as of February 1, 2023. This is the case for all of their crypto exchange clients. As a result, some individual users may not be able to use SWIFT bank transfers to buy or sell crypto with/for USD for amounts less than 100,000 USD,” Binance said in a statement according to Bloomberg News.
We contacted Signature Bank for confirmation but didn’t receive a response in time for publication.
Signature earnings call:
mentioned reducing deposits, not transactions
During Signature’s earnings call last week, the bank confirmed its move to reduce digital asset deposits but did not mention transaction restrictions. Deposits declined by $7.35 billion during Q4 of 2022, and the bank plans another $3 to $5 billion reduction in 2023 with 1,410 digital assets clients currently active. Compared to the much smaller Silvergate, the change has not made such a big impact on the bank.
The move to limit transactions appears to contradict comments made by Signature Bank’s CFO Stephen Wyremski, during last week’s earnings call. Signature has its Signet network, a blockchain-based payment network used for conventional payments between clients of the bank and crypto onramps. In Q4, the crypto transactions totaled $275.5 billion. In comparison, for competitor Silvergate, the volumes were $117.1 billion.
Wyremski was asked how the reduction in digital asset deposits would impact Signet fees and costs. Here’s his response:
“We’re not necessarily exiting client relationships there, but we are lowering concentrations there. So we’re seeing volumes on Signet – volumes last quarter were the highest we’ve seen even as we were exiting these later in the year. So we don’t really expect much of an effect on Signet volumes. There’s really not much of a cost for us to operate Signet. So we’re not going to see any cost-benefit there if volumes did come down in that space.”
“From a fee income perspective, same answer, really. We’re not exiting client relationships really. So we’re not going to see much of a change in our foreign exchange and other sources of fee income there. So ultimately, all we’re doing is limiting the amount that clients can maintain in overall deposits at our institution.”
Leveraging its blockchain payments network
Apart from enabling the crypto space, Signature has been a blockchain pioneer since the launch of the Signet blockchain payments network back in 2018, which was approved by local regulator NYDFS. The Signet network was developed by trueDigital that has since rebranded to Tassat, which recently launched a blockchain-based network for interbank payments.
During the earnings call last week, COO Eric Howell discussed using blockchain for payments. Another sector that benefits from 24/7 payments using Signet is cargo shipping firms, the largest user of Signet by number of transactions. However, crypto trumps shipping in dollar volume. After shipping and crypto, payroll companies are the third largest ecosystem on Signet.
“I mentioned that I didn’t think that crypto would be in the top 10 (on Signet) once we had other industries embrace blockchain technology,” said Howell. “One of our shareholders said it probably would not be in the top 100. So it’s just a matter of educating others out there. We look forward to having more non-digital (asset) ecosystems.”
Smaller competitor Silvergate is far more dependent on the digital asset sector. In early January, it announced major layoffs and last week, announced a loss of $1 billion for the quarter because of the impact of the crypto collapse.