Signature Bank Fiasco Forces Major Crypto Trading Platform to Look For New Payment Network Provider

Coinbase, one of the world's largest centralized cryptocurrency exchange platforms (CEX), has decided to cut ties with Signature Bank's Signet network and is now looking for a new payment network provider following the lender's collapse that threatened the stability of the country's financial system.

Over a week after state regulators intervened and shut down the crypto-friendly lender Signature Bank, Coinbase Global, the American publicly traded company that operates Coinbase CEX, reportedly told its clients Monday that it is no longer supporting Signet, the real-time payments network of the collapsed Signature Bank, the Wall Street Journal reported.

While Coinbase assured customers that it is already looking for a new payment provider, its customers who use Signet for U.S. dollar withdrawals or deposits will not be able to send funds outside of banking hours. But customers can still make crypto withdrawals, deposits and even conversions from USDC stablecoin to U.S. dollars anytime on Coinbase Exchange.

Since Signature Bank tumbled down, the fate of the Signet network remained uncertain.

U.S. financial regulators, after shutting down the bank, removed its top executives and transferred its assets to a new entity called Signature Bridge Bank which is run by the Federal Deposit Insurance Corporation (FDIC).

The Signet network is still operating, Coindesk reported, citing a source for this information, although it claimed that several clients have encountered hitches while using it. "Signet is still in our receivership, no decisions have been made regarding it at this time," an FDIC spokesperson told the outlet.

Talking about the latest move by the publicly traded company, a spokesperson from Coinbase said "while not ideal, this shows a need for an updated financial system."

Signature Bank was the second crypto-friendly bank to collapse following the crash of Silvergate Bank on March 8 and the lender Silicon Valley Bank on March 10.

Regulators said they intervened in Signature Bank's business to "protect the U.S. economy by strengthening public confidence in our banking system." Several reports claimed that Signature Bank had no solvency issues when it was shut down on March 12.

However, the New York State Department of Financial Services (NYDFS) revealed that the main reason for the move was that it lost faith in the leadership of the New York-based lender.

"The bank failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank's leadership," the NYDFS shared in a statement to Bloomberg.