March 14, 2023
SINGAPORE – Some of the big names in the cryptocurrency world with regional headquarters in Singapore have rushed to assure customers that business will go on, as the shutdown of two US banks in the past three days stoked fears round the globe.
Peer-to-peer payment firm Circle Internet Financial and cryptocurrency exchanges Coinbase and Crypto.com, all of which have received in-principle approval from the Monetary Authority of Singapore (MAS) to offer digital payment token services in the Republic, on Monday sought to give assurance to customers.
In a reply to media queries, MAS on Monday said it is in close touch with Enterprise Singapore to assess any potential impact of international developments on Singapore start-ups, including those with operations in the United States.
“The initial feedback indicates that the impact is limited. MAS and other government agencies will continue to monitor the situation closely for any signs of stress,” the regulator said.
Circle’s chief executive Jeremy Allaire early on Monday said on Twitter that customers will be able to redeem from Tuesday its token USD Coin (USDC) that is pegged to the US dollar.
He said automated USDC minting and redemption for customers will be through Cross River Bank, while redemptions can also be made via Bank of New York Mellon.
Mr Allaire’s comments come after the US Federal Reserve, Treasury Department and the Federal Deposit Insurance Corporation on Monday morning took the extraordinary step of designating the two US banks – Silicon Valley Bank and Signature Bank – which are popular with fintech and crypto firms, as a systemic risk to the financial system.
Such a move is not a bailout but it gives US regulators the flexibility to guarantee uninsured deposits. It means customers of both American banks will be able to get back all their deposits.
Circle, which received the MAS nod last November, said it has US$3.3 billion (S$4.5 billion), or about 8 per cent of total USDC reserves, deposited at Silicon Valley Bank, and this will be fully available when US banks open on Tuesday. It added that no USDC cash reserves were held at Signature Bank.
Exchange Coinbase, which got the nod from MAS last October, on Monday said in a series of tweets that it continues to operate as usual and that “all client funds continue to be safe and accessible, including USDC conversions”.
The exchange said that as at end-Friday, it had about US$240 million in corporate cash at Signature Bank, and it expects “to fully recover these funds”.
When asked, Crypto.com, which received MAS in-principle approval in June 2022, said there is “no impact to the Singapore business”.
Its chief executive and co-founder Kris Marszalek had tweeted that the exchange has “zero exposure” to Signature Bank, and that the firm is in the process of resuming all USDC services.
In an earlier tweet, Mr Marszalek also declared that the firm did not have exposure to Silicon Valley Bank or crypto-focused Silvergate Bank.
Silvergate, the first US bank to run into trouble of late, said last week that it would wind down operations and voluntarily liquidate. The decision came after it was hit with a liquidity crunch following the collapse of US crypto exchange FTX late last year.
On Friday, the California authorities seized Silicon Valley Bank, the 16th largest in the US.
Silicon Valley Bank’s failure was led by a bank run that came about due to higher interest rates. The bank’s clients, many of which are tech start-ups and fintech firms, started to pull money out to meet liquidity needs as fund-raising became harder.
The fall of Silicon Valley Bank, combined with the crypto market rout, prompted the US authorities to close Signature Bank on Sunday, given the threat Signature posed to the entire financial system.
The New York-based lender is known for its huge real estate lending business, and it had become one of the main crypto banks. The lender’s closure is the third-largest bank failure in US history and the second massive bank failure within days.