US regulators have taken the step to close Signature Bank, which was based in New York and was popular with cryptocurrency holders.
Despite providing a service of placing digital assets on customer deposits, the banking institution did not invest in, trade in or accept crypto-assets as collateral for loans. A joint statement from the US Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) confirmed that all depositors will receive a full refund. However, this protection does not extend to shareholders and holders of unsecured debentures. Bank staff have been removed from their positions.
The Federal Reserve and regulators said in a joint press release that they would provide banks with additional funds to meet all depositor requirements. Securities pledged by banks as collateral will be highly valued - at nominal rather than market value - on favourable terms.
"The reforms adopted after the financial crisis to strengthen and protect the banking industry have enabled our banking system to remain reliable and strong. Along with today's measures, this shows our commitment to protecting depositors' funds," the statement said.
The California Department of Financial Protection and Innovation closed Silicon Valley Bank on March 10 and placed it under the control of the FDIC. This was the most significant bankruptcy since the 2008 financial crisis.