Regulators closed Signature Bank as emergency protections steadied USDC

New York regulators took possession of Signature Bank on March 12, 2023, and appointed the Federal Deposit Insurance Corporation as receiver, closing a major banking counterparty for digital-asset companies just as federal intervention eased a separate reserve threat to the USDC stablecoin.

The same evening, the Treasury Department, Federal Reserve and FDIC invoked a systemic-risk exception for Signature and said all of its depositors would be made whole. The agencies extended equivalent protection to Silicon Valley Bank depositors. That decision removed the immediate risk that Circle would suffer a loss on $3.3 billion of USDC reserve cash trapped at Silicon Valley Bank, but Signature’s closure simultaneously narrowed the banking infrastructure available to crypto firms.

Signature moved into an FDIC bridge bank

The New York State Department of Financial Services said it acted under Section 606 of New York Banking Law to protect depositors. Its March 12 notice placed Signature’s assets at approximately $110.36 billion and deposits at approximately $88.59 billion as of December 31, 2022. Those were year-end balance-sheet figures, not balances at the moment regulators intervened.

The FDIC transferred all deposits and substantially all assets to Signature Bridge Bank, a temporary full-service national bank operated by the agency. It said Signature’s 40 branches and online banking would resume on March 13. Shareholders and certain unsecured debtholders were not protected, senior management was removed, and any Deposit Insurance Fund loss attributable to supporting uninsured deposits was to be recovered through a special assessment on banks.

For the crypto sector, continued depositor access did not mean the operating disruption had disappeared. Contemporaneous reporting identified Signature’s Signet real-time payment system as a route used by Circle, Coinbase and trading firms for round-the-clock settlement. Circle was seeking replacement transaction-banking capacity after the closure. The March 12 record established the interruption and search for alternatives; it did not establish how quickly every affected company would restore equivalent service.

USDC moved back toward one dollar

Circle stated in a release carrying a March 12 dateline that the $3.3 billion held at Silicon Valley Bank represented about 8% of total USDC reserves and would be fully available when banks opened on March 13. Circle also said no USDC cash reserves were held at Signature and maintained that USDC remained redeemable one-for-one for dollars.

Those were issuer statements supported, as to access at Silicon Valley Bank, by the government’s depositor-protection announcement. They were not an independent audit of every reserve asset. Circle’s reserve snapshot said 77%, or $32.4 billion, was held in short-dated U.S. Treasury bills and 23%, or $9.7 billion, in cash, primarily at BNY Mellon.

The Block reported USDC at $0.99 at 7:37 p.m. Eastern on March 12, after the token had traded below its intended dollar value during the banking shock. That is a contemporaneous spot observation; the report did not specify a single exchange, executable bid or composite methodology. It therefore shows near-parity at that timestamp, not a universal price across every venue or proof that redemptions had normalized.

Emergency policy reached beyond two failed banks

At 6:15 p.m. Eastern, the Federal Reserve also announced the Bank Term Funding Program. Eligible banks, savings associations, credit unions and other depository institutions could borrow for as long as one year against qualifying Treasuries, agency debt and agency mortgage-backed securities valued at par. Treasury made up to $25 billion from the Exchange Stabilization Fund available as a backstop, while the Fed said it did not expect to draw on that amount.

The combined action mattered because the USDC disruption had exposed a basic dependency: a token can circulate on-chain continuously while its reserve custody, minting and redemption still rely on banks and public financial infrastructure. March 12 brought immediate protection for Circle’s Silicon Valley Bank cash, a near-recovery in USDC’s secondary-market price, and the loss of Signature as an independent bank. It reduced one acute risk while leaving crypto companies with a more concentrated set of dollar rails.