Tether Utilized Signature Bank to Gain Access to US Financial Market

According to sources, Tether Holdings Ltd. used Signature Bank as a pathway to access the US banking system, instructing clients to pay for stablecoins by sending dollars to Capital Union Bank Ltd. in the Bahamas through Signature’s Signet payments platform.

Although it’s unclear when the arrangement started, it was in place when Signature Bank was taken over by regulators last month. This highlights the challenge that crypto firms face when trying to access a reluctant US banking system, prompting them to search for alternatives at smaller, more willing lenders.

The situation also demonstrates the regulatory expectations placed on banks to know their customers’ access to their products and services. If Signature Bank knew about and allowed the arrangement, it could suggest a high-risk appetite.

The setup involved Tether instructing crypto clients to pay for stablecoins by sending dollars to Capital Union Bank Ltd., which is based in the Bahamas and is one of Tether’s banking partners. The payment was made through Signature’s Signet payments platform. It is unclear when the arrangement started, but it was in place when Signature Bank was taken over by regulators last month.

This highlights the challenge faced by crypto firms in accessing a reluctant US banking system, and it also underscores the regulatory expectations placed on banks to know their customers and their access to banking products and services.

However, Tether maintains that its risk management ensures that its entities won’t be affected by exposure to Signature. The Signet payments network operated by Signature Bank allowed crypto clients to settle trades with fiat dollars outside of normal business hours, aligning with the 24-hour nature of crypto transactions.

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