The recent collapse of Signature Bank has brought to light the ties the institution had to stablecoin issuer Tether. The links between both parties may reach far back, as Tether reportedly used Signature Bank’s Signet payments platform for some of its operations. Since the news of Signatures Bank’s insolvency, questions around Tether’s involvement have been raised and debated, with no real consensus on the exact nature of their arrangement and the risk levels it may have posed. Regulators closed Signature Bank due to systemic concerns around its crypto-focused banking activities, but it’s uncertain if Tether played any part in the collapse.

Tether’s Chief Technology Officer Paolo Ardoino denied these rumors, tweeting that “Tether doesn’t have any exposure to Signature Bank.” However, Bloomberg reported that unnamed sources had disclosed Tether’s use of Signet to transfer funds to the United States, though the amount and timeframe of use was not disclosed.

Additionally, Alma Angotti, a former spokesperson for the SEC and the Treasury Department, suggested that if Signature knew about the arrangement, it could have been seen as a way to deal with Tether without taking on much risk. She theorized that “Signature may have known and decided this is less risky than opening up an account for Tether directly.”

So far, no evidence of wrongdoing at Signature or by its employees has been uncovered. Furthermore, Tether has never been sanctioned and therefore dealing with the company does not pose any legal threat. The possibility of risk with such a setup is not to be taken lightly, however.

The additional revelation of Signature Bank insiders selling $100 million in stock during the crypto boom of 2021 continues the mysterious case of Signature Bank’s collapse. The Wall Street Journal (proudly anti-crypto) reported that shares of the bank almost doubled in value during the same year. Furthermore, while holding crypto assets at the bank was disallowed in March, customers had previously been able to do so, which many have suggested may have been a risky move for the institution.

Crypto markets responded to the news with a 3% gain in market capitalization. This rally may suggest that the market has no evidence that Tether played a role in the collapse of Signature bank, or at least that it did not deserve the scrutiny it has been under recently.

As of now, the mystery surrounding Signature Bank’s insolvency remains unresolved. What we do know is that the shuttering of banks like Signature and Silvergate is part of a larger pushback by U.S. regulators against cryptocurrencies, and has the potential to significantly harm crypto investors if the ability to transfer to and from fiat currencies is impaired. With Tether’s involvement yet to be determined, time will tell whether the incident will be remembered as a mere blip or a much larger financial disaster.

The post The Specter of Risk: Signature Bank’s Tether Use and the Shadow of Unanswered Questions appeared first on Boxmining.

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Filed under: Bitcoin - @ April 6, 2023 8:25 am