The Big Scandal Behind Pro-Crypto Signature Bank Shutdown
Signature Bank, another major crypto-friendly institution, was shut down by regulators on Sunday. The New York financial institution, with a large lending business in the crypto industry, was caught in the “crossfire” of regulators to prevent the spreading banking crisis.
Yesterday, the U.S. Federal Reserve (Fed) stated that keeping the bank open could “threaten the stability of the entire financial system.” Similar to what was done to ensure depositors at the failed Silicon Valley Bank (SVB), regulators stated that the crypto-friendly Signature Bank would have full access to their deposits. The Fed said:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After the sudden collapse of Silicon Valley Bank and the third largest bank failure in U.S. history, former Congressman and current director and board member of Signature Bank, Barney Frank, sees the recent moves by regulators against pro-crypto bank Signature as an “anti-crypto message.”
Regulators Shutdown Signature To Attack Pro-Crypto Allies?
According to a CNBC report, the sudden move by U.S. regulators “shocked” executives at Signature Bank. For bank director Barney Frank, the executive had “no indication of problems” until the deposit run they received on Friday, following the fall of Silicon Valley Bank, to what the former congressman claimed was “pure contagion” from the SVB fall.
Frank co-sponsored the landmark Dodd-Frank Act created to curb the financial sector’s risky activities post-2008. On the current situation, the former government official added:
I think part of what happened was that regulators wanted to send a very strong anti-crypto message. We became the poster boy because there was no insolvency based on the fundamentals.
Did The Signature Bank Held Crypto Deposits?
Regulators, for their part, are conducting a sale process for the crypto-friendly bank while reportedly guaranteeing customers uninterrupted access to deposits and services. According to Frank, Signature executives have been exploring “all options” to address the problems, including raising capital and gauging interest from potential acquirers.
The bank also claimed that its customer deposits related to digital assets stood at $16.52 billion, making it one of the few financial institutions to open its doors to accept crypto asset deposits after entering the industry in 2018.
Moreover, Christopher Whalen of Whalen Global Advisors told the New York Times that this story has more to do with crypto, “a huge miscalculation by veteran bankers.”
With the ongoing global financial crisis, Signature Bank’s shares began declining on Wednesday, March 8, after closing the trading day at $103 on the Nasdaq Stock Market, now trading at $70 per share.
Three crypto-friendly banks have fallen victim to regulatory policy in less than a month. However, investors seem to be betting more on crypto assets than the traditional financial system, as the crisis shows no signs of easing.
The global cryptocurrency market capitalization has returned well above the psychological level of $1 trillion. Representing a “safe haven” for investors and regaining confidence in digital assets has led to all major cryptocurrencies thriving and regaining previously lost levels.
Featured image from Unsplash, chart from TradingView.com.