currency exchange Signature Bank did not have any funds for Gemini, and its Gemini US Dollar (GUSD)
The defunct cryptocurrency bank Signature Bank no longer holds any of the funds belonging to the cryptocurrency exchange Gemini or their customers, according to a public statement.
Following the failure of Silicon Valley Bank, Signature Bank filed for bankruptcy a few days ago.
While Gemini is based in New York and Silicon Valley Bank mostly operated in California, many cryptocurrency startups used Signature Bank as their bank.
The partnership between Gemini, a cryptocurrency exchange, and Signature Bank
Gemini and Signature Bank both have their headquarters in New York. Signature Bank specialised in venture banking, commercial real estate, private equity, and mortgage services.
It was established in 2001, long before cryptocurrencies became popular, but by 2023, assets tied to cryptocurrency accounted for 30% of its deposits.
Its assets and deposits were $110 billion at the time of liquidation, making it the third-largest bank collapse in US history by face value.
As Signature Bank entered the cryptocurrency market in 2018, more than 16% of its deposits came from this industry by 2021. Also, it held a portion of Circle’s USDC reserves.
Because to this growth, its stock market value increased from $75 to $375 in just over a year, earning it the moniker “crypto bank” at that time.
Eight of the top twelve cryptocurrency brokers have accounts with Signature Bank, according to the Financial Times, and in 2019 the bank had also created an open payment network called Signet that permitted real-time settlement of cash transfers via blockchain. By the end of 2020, 740 clients were already utilising Signet.
As a result, it wasn’t a bank designed specifically for cryptocurrency users but rather a conventional bank that had just opened its doors to the industry.
Gemini’s cryptocurrency holdings and Silvergate Bank’s closure
Gemini, on the other hand, is one of the biggest crypto exchanges in the US, albeit having lost some market share recently.
For instance, while Gemini’s daily trading volume has fallen to $33 million, the largest US exchange, Coinbase, still has more than $2 billion in daily trading volume.
With a daily trading volume of $1.2 billion, Kraken is now the other significant American cryptocurrency exchange. For example, Binance US has just under a billion users, and in this regard, Gemini has now been surpassed even by more obscure and smaller exchanges like PointPay, WOO X, Felixo, and many others.
The majority of transactions on Gemini are made in USDT and USDC and involve BTC and ETH. The rest is only incidental.
Despite this, its potential connection to Signature Bank’s demise would undoubtedly have caused another blow to the cryptocurrency industry, therefore the official announcement served to stop the spread of fresh panic.
It is important to note that Gemini has over the years focused primarily on institutional-level cryptocurrency services targeted at large clients, therefore it is primarily custody rather than trading that may have caused major issues in the event of a cash shortage.
Gemini’s stablecoin is GUSD.
Although Gemini does not have its own token, it has released Gemini Dollar, a stablecoin (GUSD).
When it was first released, it appeared as though it could compete with its two primary rivals, USDT and particularly USDC, but over time, it turned out to be a very poor enterprise.
It is sufficient to note that, despite never truly losing its peg to the dollar, its market value was capped at $1 billion. Additionally, it has since declined to its current 600 million from its peak of 866 million in November of last year.
For instance, USDT capitalises as much as 74 and USDC as much as 37 billion. The algorithmic stablecoin USDD, which has recently experienced significant problems losing its peg with the dollar, currently has a market capitalization that is lower than GUSD.
So, it is clear that Gemini is having a hard time at the moment.
Gemini and Signature Bank’s demise
At least it has not encountered issues as a result of the collapse of Signature Bank.
They acknowledge in formal statements that they have worked with the bank as a partner for the majority of the past ten years, but they also say they no longer have any money deposited with them.
In actuality, JPMorgan, Goldman Sachs, and State Street Bank currently hold all of Gemini’s bank deposits, including those of the funds they maintain on behalf of their clients.
Goldman Sachs, Fidelity, and State Street Bank hold all of the reserves for the GUSD.
Gemini emphasises in its official communications that all of its clients’ funds and dollar reserves are fully insured and hence accessible for withdrawal at any moment.
For instance, FTX, the second-largest U.S. cryptocurrency exchange behind Coinbase, which declared bankruptcy in November, does not fit this description.
Gemini also claims that they are continuing to actively monitor counterparty risk as a result of banking agreements to prevent any impact on consumers, underscoring a distinct and more cautious attitude.
At this time, it shows that they may have recently made the decision to discontinue utilising Signature Bank’s banking services, perhaps as a result of their perception that the dangers associated with this bank’s resilience were rising.