Signature Bank has it

Welcome to The Daily Moon. It’s a brand new week. And turns out Binance doesn’t own WazirX. Or does it? Binance said that the 2019 deal never went through, while WazirX founder Nischal Shetty claimed that his exchange did strike a deal with Binance’s parent. This one is going to run and run. Watch this space.

Moving on, today we talk about why Signature Bank is different, and Twitch’s crypto gamble lures gamers.

The markets were flat, with Bitcoin at ~$23,000 and Ethereum at ~$1,680. Nasdaq fell on a volatile session. Back home, Sensex and Nifty closed flat after an expected 0.5% rate hike by the RBI.

Image by Engin Akyurt from Pixabay 

Is Signature Bank the crypto outlier?

Crypto could be in the deepest of winters, but digital asset-friendly Signature Bank isn’t worried. Even if every single crypto deposit is withdrawn, the bank claims it can handle it. At a time when entities such as Celsius, Voyager, and MicroStrategy, with deep positions in digital assets, are floundering, Signature believes it can escape relatively unscathed.

This is a tall claim to make considering that its stock has fallen 43% since the beginning of the year. Brokerages have forecasted a fall in earnings per share on the back of crypto volatility.

The bank’s Q2 earnings, which came amidst the Terra-Luna crash, were a mixed bag. Net income rose to $339 million compared to $215 million a year ago, but the ~5% quarterly fall in total deposits to $104.12 billion was a dampener.

What’s the crypto connection?If you haven’t heard of Signature Bank, we don’t blame you. Despite being the 30th largest bank in the US, Signature Bank does not advertise. It only has seven official branches.

Set up in 2001, Signature Bank started out as a full-service commercial bank in New York. It began attracting private clients and expanded its lending business. But after 17 years in operations, where it grew to ~$100 billion in deposits, there was a need to change.

This was a time when instant payments and digital assets had started to gain prominence. Traditional banks were hesitant to support these clients, so Signature Bank found a business opportunity.

Commercial clients, such as crypto exchanges, also asked for a payment solution to enable instant payments, 365 days of the year. That’s when the bank launched a new payment solution called Signet.

Signet was developed as a flagship payment solution for institutions to deposit crypto into these accounts. Using blockchain technology, Signet processes payments in real-time, 24/7. This was a new avenue for crypto payments, backed by FDIC insurance. Crypto trades between institutions and crypto exchanges happen on this platform.

Why is it immune?Unlike crypto peers, Signature Bank did not have direct exposure to Terra’s USD token. So when Terra and Luna imploded, the bank did not face a financial crisis. Why?

• It does not hold any crypto assets. All assets are held in US Dollars as per regulatory requirements.

• It has not made investments in the crypto markets. The bank has cash balances to deal with the financial constraints of a bear market.

As of May, there were $29 billion of crypto deposits on the Signet platform. To handle sudden financial emergencies, the bank has $20 billion in securities and $14.6 billion in cash balances.

The only impact that it felt was a decline in digital assets. The bank said that total deposits fell by ~$5 billion in Q2 because of a slump in client balances. Of this, $2.4 billion was due to a decline in digital asset deposits.

Because of the physical assets, Signature Bank is prepared for doomsday scenarios such as the withdrawal of all crypto deposits.

In comparison to other “crypto banks”, Signature Bank appears to be in a better position to overcome contagion risks.

Twitch Has A Gambling Problem

Gamers on Twitch have a new problem: gambling. Often popular creators promote crypto gambles to their viewers. Younger viewers, more often than not, want to try and get hooked through promotional links to third-party crypto casinos. And there’s one cardinal rule for gambling: the house always wins.

What is happening?Twitch creators with large numbers of followers are paid to gamble for an audience. In fact, this gamble-streaming category called “slots” is more popular than the video game Fortnite. Just for context: 41% of Twitch’s users are between the ages of 16 and 24. Some of these users are tempted by the concept of easy wins through games, which look similar to the ones they are used to playing. Most online casinos accept crypto and the content creators encourage their audience to give these games a try. Very few win at these games.

Twitch claims it will investigate these crypto casinos.

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Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.