Tether, the firm behind the largest stablecoin by market capitalization, reportedly allowed its clients to send funds through Signature Bank's payment platform, granting the firm access to banks in the United States.
According to a Bloomberg report on April 4, Tether had a path into the US banking system by instructing its users to send dollars via Signature's Signet to its partner in the Bahamas, Capital Union Bank. The report cited "people with knowledge of the situation" who added that this system was in place at the time regulators took control of Signature in March.
Tether doesn't have direct access to the US banking system, but for a while it found at least one way: through Signature Bank. https://t.co/gKDgTs6Jae
โBloomberg (@business) April 4, 2023
While the deal between Tether and Signature reportedly would not have been illegal, failure to disclose such information to the investing public would suggest high-risk practices. According to a Tether spokesperson, the banks used by the stablecoin issuer "always had access to various banking channels and counterparties" and partner entities "would not be affected by direct or indirect exposure to Signature."
The New York Department of Financial Services announced the closure of Signature on March 12, saying the decision had been made at that time with the Federal Deposit Insurance Corporation (FDIC) in an effort to "protect the U.S. economy." .UU." Paxos Stablecoin Issuer informed at the time had $250 million tied to Signature, while Tether CTO Paolo Ardoino said the company had no exposure to the failed bank.
#tie does not have any exposure to Signature Bank.
โ Paolo Ardoino (@paoloardoino) March 12, 2023
Related: Signature Crypto Clients Told To Close Their Accounts By April 5: Report
US lawmakers continue to investigate the collapse of the crypto bank, the third in a chain starting with Silvergate and Silicon Valley. At a March 28 hearing of the Senate Banking Committee, FDIC Chairman Martin Gruenberg said Signature I had not managed properly Traditional banking risks. Although Signature had reduced its exposure to digital assets in the wake of the FTX exchange crash, one user has filed a lawsuit alleging that the bank "aided and abetted" the fraud facilitated by former FTX CEO Sam Bankman-Fried.
The bank plans to sell its deposits are worth about $38 billion and $13 billion in loans to Flagstar Bank, a subsidiary of New York Community Bancorp. Gruenberg said $4 billion in crypto deposits it will likely be returned to users sometime this week.
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