By Hannah Lang
Dec 4 (Reuters) – Former Signature Bank executives are launching a new blockchain-based bank focused on facilitating instant, around-the-clock U.S. dollar payments, nearly three years after the collapse of the New York-based bank known for serving cryptocurrency clients.
The bank, called N3XT, was founded by Scott Shay, the founder and former chairman of Signature Bank. Jeffrey Wallis, who was previously director of digital asset and Web3 strategy at Signature, will be N3XT’s CEO. Reuters is reporting the new venture for the first time.
N3XT will operate globally under a Wyoming special-purpose bank charter and will not engage in any lending activities.
Every dollar of deposits in N3XT will be backed by cash or short-term U.S. Treasuries, and it will publish its reserve holdings on a daily basis, which distinguishes it from Signature, Wallis said. Its reserves will be held at custodial partners, which he declined to name. The blockchain-based bank will not be insured by the Federal Deposit Insurance Corporation, and Wyoming special-purpose banks are not required to obtain FDIC insurance.
“We do not lend against our balance sheet, so clients always have confidence that their capital is available to them and never at risk and always stands ready to be able to be used according to their economic needs,” Wallis said.
Signature was a commercial bank with $110 billion in assets and several business lines, including commercial real estate and digital asset banking. Regulators closed Signature in March 2023, days after the collapse of Silicon Valley Bank, making it the third-largest failure in U.S. banking history. It collapsed after mounting outflows that were triggered by depositors’ rush to withdraw their money.
Signature operated a payment network called Signet that allowed its commercial crypto clients to make payments 24 hours a day, seven days a week, which Wallis said was an “influential” experience in building N3XT.
“N3XT, in of itself, takes advantage of not only the technology experience that we have and the model experience we have, but also thinking about really creating a bank structure that is new and unique and very different, whereby we make our clients’ liquidity or their capital always available to them,” Wallis said.
A subsequent FDIC report said Signature’s failure was caused by “poor management” and a pursuit of “rapid, unrestrained growth” with little regard for risk management.
Wallis said N3XT’s risk management standards are not comparable to those of Signature.
“We are not making any lending decisions with the balance sheet,” he said. “We … are keeping our clients’ assets in full liquid form.”
N3XT plans to target digital asset clients at the outset, many of which Wallis said have already started the onboarding process.
(Reporting by Hannah Lang in New York; editing by Michelle Price and Paul Simao)
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