In December, Signature Bank signaled that it would reduce player deposits of digital assets following the cryptocurrency crash. It is now also restricting payment transactions where it acts as an on-ramp and off-ramp, sending and receiving fiat payments for cryptocurrency exchanges. That is according to the largest exchange Binance. The move is surprising, given comments made during Signature’s earnings call last week.

“One of our trustee banking partners, Signature Bank, has reported that it will no longer support any of its crypto exchange clients with buy and sell amounts of less than $100,000 starting February 1, 2023. This is the case. from all your crypto exchange clients. As a result, some individual users may not be able to use SWIFT bank transfers to buy or sell cryptocurrencies with/for USD in amounts less than USD 100,000,” Binance said in a statement according to Bloomberg News.

We’ve reached out to Signature Bank to confirm, but haven’t heard back in time for publication.

Firm earnings call:
You mentioned reducing deposits, not transactions

During Signature’s earnings call last week, the bank confirmed its move to reduce digital asset deposits, but made no mention of transaction restrictions. Deposits decreased $7.35 billion during the fourth quarter of 2022, and the bank plans another reduction of $3 to $5 billion in 2023 with 1,410 currently active digital asset clients. Compared to the much smaller Silvergate, the change has not had as big an impact on the bank.

The move to limit trading appears to contradict comments made by Signature Bank CFO Stephen Wyremski during last week’s earnings call. Signature has its Signet network, a blockchain-based payment network used for conventional payments between bank customers and crypto onramps. In the fourth quarter, crypto transactions totaled $275.5 billion. By comparison, for competitor Silvergate, volumes were $117.1 billion.

Wyremski was asked how the reduction in digital asset deposits would affect Signet’s fees and costs. Here is his response:

“We are not necessarily terminating customer relationships there, but we are reducing concentrations there. So we’re seeing volumes at Signet — last quarter volumes were the highest we’ve ever seen, even as we came out of these later in the year. So we don’t really expect much of an effect on Signet volumes. There really isn’t much of a cost for us to operate Signet. So we’re not going to see any cost benefit there if volumes were to go down in that space.”

“From a fee revenue perspective, same answer, actually. We’re not actually getting out of customer relationships. So we’re not going to see much change in our currencies and other sources of fee income there. So ultimately all we’re doing is limiting the amount that clients can keep in general deposits at our institution..”

Leveraging your blockchain payment network

In addition to enabling the crypto space, Signature has been a pioneer in blockchain since the launch of Signet’s blockchain payments network in 2018, which was approved by local regulator NYDFS. The Signet network was developed by trueDigital, which has since changed its name to Tassat, which recently launched a blockchain-based network for interbank payments.

During last week’s earnings call, COO Eric Howell spoke about using blockchain for payments. Another sector that benefits from 24/7 payments with Signet is freight forwarding companies, the largest user of Signet by number of transactions. However, cryptocurrencies trump shipping in dollar volume. After shipping and cryptocurrency, payroll companies are Signet’s third largest ecosystem.

“I mentioned that I didn’t think cryptocurrencies would make the top 10 (on Signet) once other industries embraced blockchain technology,” Howell said. “One of our shareholders said that he probably wouldn’t be in the top 100. So it’s just a matter of educating others. We hope to have more non-digital (active) ecosystems.”

The smaller competitor, Silvergate, is much more reliant on the digital asset sector. In early January, he announced major layoffs and last week announced a $1 billion loss for the quarter due to the impact of the cryptocurrency crash.