Signature Bank was Shut Down to Send a Message to Crypto Investors: Former Congressman Says
- Barney Frank, a member of the Signature Bank board, claims that the regulators shut down the bank to send a message to crypto investors.
- Frank, also a former US Congressman, believes that the New York state regulators “wanted to send the message that crypto is toxic.”
- The bank had a “solid loan book,” and if the regulators had allowed the financial institution to open on Monday, they “could’ve continued,” claims Frank.
- “They closed us even though there was no good, compelling reason to do that because they wanted to show that banks shouldn’t be involved in crypto,” said Frank.
The collapse of Silicon Valley Bank (SVG) shook the United States banking system as several regulators came together to take control of the situation. This led to the stocks of many banking institutions dropping significantly and the risks of bank runs on other banks rising. Interestingly, following SVB, another bank based in New York, the Signature Bank, was shut down by the New York Department of Financial Services (NYDFS).
According to a statement from Barney Frank, a former Congressman known for co-authoring the Dodd-Frank Act following the 2008 market collapse to prevent a global crisis, Signature Bank was closed down by the NYDFS to send a message to crypto investors and make a point that blockchain-based digital currencies are dangerous.
“Crypto panic generated that set of withdrawals,” said Frank, who is also a member of the Signature Bank board. “By Sunday, we had stabilized the situation … But I believe the regulators, especially the New York state regulators, wanted to send the message that crypto is toxic.”
Frank spoke during an interview on Bloomberg radio, adding that Signature Bank had a “solid loan book” and if the regulators had allowed the financial institution to open on Monday, they “could’ve continued.”
As reported earlier by Bitnation, Superintendent Adrienne A. Harris confirmed that the New York Department of Financial Services (DFS) has taken possession of Signature Bank and the Federal Deposit Insurance Corporation (FDIC) has been named the receiver for the banking firm.
It is crucial to note that the regulator revealed that the bank had total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022. The regulator shut down the bank to prevent the domino effect that the fall of SVB would initiate.
“I think that if we’d been allowed to open tomorrow [Monday] that we could’ve continued—we have a solid loan book; we’re the biggest lender in New York City under the low-income housing tax credit,” Frank said. “I think the bank could’ve been a going concern.”
More importantly, Signature Bank was a crypto friendly bank that was involved with many crypto firms that had deposited their money in the bank. In 2018, the NYDFS authorized a blockchain-based digital platform offered by a banking institution called Signet. The bank’s CEO, Joseph DePaolo, told the Royal Gazette at that time that the platform was being used by firms to transfer millions of dollars.
According to the former US Congressman, the only reason why regulators closed Signature Bank was to show other banks that involvement in crypto is dangerous and not supported by the authorities.
“They closed us even though there was no good, compelling reason to do that because they wanted to show that banks shouldn’t be involved in crypto,” said Frank. “We were the kind of poster child for having been involved in crypto.”
On the other hand, after Signature got shut down, crypto mining firm Marathon Digital Holdings disclosed that the funds deposited by them at the bank are secure and available for use as of March 13.
Another important fact to note here is that the President of the United States, Joe Biden, claimed in a Twitter post that the US banking system is safe. He confirmed that the SVB and Signature Bank depositors will be made whole “at no cost to the taxpayer.”