The Federal Reserve took unprecedented emergency action on March 13, 2023, launching a new lending facility designed to stabilize the crumbling US banking sector — a move with far-reaching implications for the cryptocurrency industry’s relationship with regulated financial institutions.
TL;DR
- Federal Reserve launches the Bank Term Funding Program (BTFP) on March 13 to provide emergency liquidity to US depository institutions
- Signature Bank shuttered by NYDFS over “similar systemic risk exception,” with FDIC creating Signature Bridge Bank as successor
- SVB collapse marks the largest US bank failure since Washington Mutual in 2008
- Treasury, Fed, and FDIC joint statement guarantees all depositors at both SVB and Signature Bank will be made whole
- Crypto industry loses two key banking partners in Silvergate and Signature within one week
The Emergency Regulatory Response
After a weekend of frantic negotiations, US financial regulators unveiled a comprehensive rescue package. The Federal Reserve announced the Bank Term Funding Program, which began operations on March 13, providing additional funding to eligible depository institutions by extending loans with maturities of up to one year. The program allows banks to pledge US Treasuries, agency debt, and mortgage-backed securities at par value rather than at their current depreciated market prices — a critical distinction that directly addresses the asset-liability mismatch that destroyed Silicon Valley Bank.
Simultaneously, a joint statement from the Treasury Department, Federal Reserve, and FDIC confirmed that all depositors at both Silicon Valley Bank and Signature Bank would have full access to their funds. “No losses will be borne by the taxpayer,” the regulators stated, while noting that “shareholders and certain unsecured debtholders will not be protected.”
President Biden publicly endorsed the intervention on March 13, tweeting that he had directed Treasury Secretary Janet Yellen and the National Economic Council to work with banking regulators on a solution that “protects workers, small businesses, taxpayers, and our financial system.”
Signature Bank: The Crypto Connection
While SVB’s collapse dominated headlines due to its sheer scale, the closure of New York-based Signature Bank strikes at the heart of the crypto industry’s banking infrastructure. NYDFS regulators shut down Signature Bank on March 12, citing a “similar systemic risk exception” — language suggesting the move was preemptive rather than reactive to an actual insolvency.
Signature Bank was no minor player. Founded in 2001, it held approximately $110.36 billion in total assets and $88.59 billion in total deposits as of December 31, 2022, operating 40 branches across five states. The FDIC immediately established Signature Bridge Bank, N.A. as a successor institution to ensure continued banking operations, including online banking services, resumed on Monday, March 13.
NYDFS later insisted the closure “had nothing to do with crypto,” with a spokesperson stating that “Signature was a traditional commercial bank with a wide range of activities and customers.” However, the crypto industry viewed the move with deep suspicion, coming just days after Silvergate Bank — another crypto-friendly institution — announced its voluntary liquidation on March 8.
Market Reaction and Crypto Resilience
The regulatory intervention had an immediate calming effect on crypto markets. Bitcoin, which had experienced significant volatility over the weekend, recovered to trade at approximately $24,198 on March 13, posting a 9.18% gain over 24 hours according to CoinMarketCap data. Ethereum gained 5.66% to trade at $1,680. The recovery was remarkable given the chaos of the preceding 72 hours, during which the USDC stablecoin had briefly depegged below $0.90.
Analysts at Deutsche Digital Assets noted that while crypto fund outflows reached -$278.4 million that week, the Coinbase-Binance premium remained positive throughout the turmoil, indicating sustained institutional buying interest even as retail investors panicked. The firm’s Crypto Sentiment Index had declined to “firmly bearish territory,” with only 5 out of 15 indicators above their short-term trend.
Regulatory Implications for Crypto
The speed and scale of the regulatory response raises important questions about the future of crypto-banking relationships. With the loss of Silvergate and Signature — two of the most crypto-friendly regulated banks in the United States — the industry faces a significant narrowing of its fiat on-ramp and off-ramp infrastructure. The FDIC’s creation of bridge banks suggests a preference for winding down crypto-related business lines rather than preserving them.
The Fed’s BTFP program, while designed to stabilize the broader banking system, does little to address the specific challenges facing crypto businesses seeking banking partnerships. As regulators explicitly distance themselves from crypto connections — as NYDFS did with Signature Bank — the industry may face an increasingly hostile environment for accessing traditional financial services, potentially accelerating the shift toward decentralized alternatives.
Why This Matters
The events of March 13, 2023 represent a watershed moment in the relationship between cryptocurrency and traditional banking regulation. The Federal Reserve’s emergency intervention prevented a broader financial contagion, but the simultaneous closure of crypto-friendly banks signals a tightening of regulatory tolerance for institutions that serve the digital asset industry. For crypto businesses and investors, the lesson is clear: the sector’s dependence on regulated banking infrastructure remains a critical vulnerability, and regulatory attitudes toward crypto banking relationships are hardening, not softening.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. The regulatory landscape for cryptocurrency is rapidly evolving. Always consult qualified professionals for guidance on compliance and investment decisions.
fed launching emergency programs to save banks while attacking crypto showed the double standard
btcf or whatever they called it was the fed admitting the banking system is fragile
fed emergency bank term funding program was basically a backdoor bailout