Tether, the company behind the largest stablecoin by market cap, is reportedly allowing its customers to send funds through Signature Bank’s payments platform giving the company access to U.S. banks.
According to an April 4 Bloomberg report, Tether gained access to the U.S. banking system by instructing its users to send U.S. dollars to its Bahamian partner, Capital Union Bank, through Signature’s Signet. The report, citing "people with knowledge of the situation," said the system had been in place when the regulator took over Signature in March. According to reports, while the arrangement between Tether and Signature is not illegal, not disclosing such information to the investing public would represent high-risk behaviour. According to a Tether spokesperson, banks used by stablecoin issuers “always have access to multiple banking channels and counterparties,” while affiliated entities “are not affected by direct or indirect exposure to Signature.”
The New York Department of Financial Services announced the closure of Signature on March 12, saying at the time that the decision was made jointly with the FDIC to "protect the U.S. economy." Stablecoin issuer Paxos reported at the time that it had $250 million pegged to Signature, while Tether’s CTO Paolo Ardoino said the company had no ties to the failed bank.
U.S. lawmakers continue to investigate the collapse of the cryptocurrency-friendly bank, the third in a chain that began with Silvergate and Silicon Valley. At a Senate Banking Committee hearing on March 28, FDIC Chairman Martin Gruenberg said Signature had failed to adequately manage traditional banking risks. While Signature reduced its exposure to digital assets following the collapse of the FTX exchange, a user filed a lawsuit alleging the bank was aided by former FTX CEO Sam Bankman-Fried under "Aiding and Abetting" Fraud.
The bank plans to sell about $38 billion worth of deposits and $13 billion in loans to Flagstar Bank, a subsidiary of New York Community Bancorp. Gruenberg said $4 billion in cryptocurrency deposits could be returned to users sometime this week.
