Signature Bank suffers $4.27B deposit outflows as crypto uncertainty takes hold

Signature Bank has released its mid-Q3 update showing a decrease in spot deposit balances attributed to crypto outflows totaling $4.27 billion.

“Digital deposit outflows are driven by the recent “crypto winter”, or downturn in cryptocurrency markets.”

By contrast, non-crypto deposits increased to $2.64 billion quarter-to-date, with “specialized mortgage banking solutions” making up the bulk of that figure, accounting for $2.29 billion.

Despite pressure from the digital asset outflows, the bank stated it is “well-positioned to meet [its] target of combined loans and securities growth” for the third quarter.

Signature Bank occupies a unique space

Signature Bank offers financial services to institutional crypto traders and crypto businesses, including exchanges and miners.

The blockchain-based Signet platform underpins this, enabling crypto clients to conduct transactions more efficiently by settling in real-time while incurring no transaction fees.

“… allowing Signature Bank’s commercial clients to make payments in U.S. dollars 24 hours a day, seven days a week, 365 days a year.”

Signet bridges the discrepancy between the U.S. banking system not operating payments in real-time and crypto markets being tradable all the time.

Signature Bank and its main rival, Silvergate Bank, are two of the only U.S. banks that run real-time payment networks and are crypto-friendly.

In July, on the release of its second-quarter results, Signature Bank investors voiced their concern with large-scale crypto outflows.

The report stated that its total deposits fell $5.04 billion to $104.12 billion during the second quarter. This was primarily due to a decrease in client balances from the New York Banking Team, which decreased by $2.4 billion, and a fall in deposits from the Digital Asset Banking Team of (also) $2.4 billion.

Crypto winter bites hard

According to the Financial Times, Signature Bank was one of the best-performing banks last year due to surging deposits from the crypto industry. However, fast forward to now, and deep within crypto winter, it’s all changed.

This is particularly noticeable in the company’s share price, which has tumbled 49% since the start of the year.

Still nursing the pain of tanking token prices and the fallout from CeFi bankruptcies, uncertainty continues to reign over the crypto industry.

Nonetheless, Signature Bank CEO Joe DePaolo explained that the bank’s direct crypto exposure is zero, as it only holds the dollar deposits of its customers and no crypto.

“it happens to be an ecosystem that we service but we have no exposure to the digital world, or the crypto world. We had one loan that we’ve done so far and it was paid back. So we have no loans outstanding. We have no digital assets on our books.”