Crypto Not It, regulators denied the signature bank was targeting ties with digital assets

by Arthur · March 14, 2023

After being shut down by US regulators on Sunday, crypto-friendly Signature Bank CEO and former congressman Barney Frank claimed they had “no indication of problems.” They suggested the bank’s shutdown was a “strong anti-crypto message” from regulators.

Following the Signature Director’s comments, the Department of Financial Services (DFS) claimed that the bank’s resolution “had nothing to do with crypto,” according to a Fortune Magazine report. A spokesperson for the Department of Financial Services told Fortune:

The decision to seize the bank and turn it over to the Federal Deposit Insurance Corp (FDIC) was based on the bank’s current status and its ability to conduct business in a safe and sound manner on Monday

Regulators targeting crypto banks?

Despite the statements of Signature Bank CEO Barney Frank, DFS told Fortune that with large withdrawal requests looming and increasing, the Department of Financial Services was working with board members and executives to evaluate the financial position of the pro-crypto bank. The regulator also evaluated the bank’s ability to meet customer withdrawal requirements.

According to the banking regulator, DFS claims the bank’s closure was related to its inability to provide “reliable and consistent data”, leading to a significant crisis of confidence in management.

Commenting on the matter, Austin Campbell, former chief risk officer at blockchain infrastructure platform Paxos, warned that while the Signature acquisition was unrelated to the bank’s crypto activities, DFS’s actions would “damage” the reputation of the crypto industry. He added:

Regardless of what DFS’s intentions were, it was taken extremely negatively by the crypto community and will negatively affect trust in DFS in the long term.

With over 20 years in the market, Signature Bank became the third regional bank to collapse in a week, following the collapse of other crypto-friendly banks such as Silvergate and Silicon Valley Bank.

The former partner of the fallen bank and US-based stock exchange Gemini tired that the company had zero customer funds and zero Gemini dollars (GUSD) with Signature. In addition, the company claimed that all Gemini client dollars are held with JPMorgan, Goldman Sachs and State Street Bank. They concluded:

We continue to actively monitor counterparty risk due to banking partnerships to prevent impact on Gemini customers.

The collapse of Silicon Valley and Signature Bank has created a domino effect on the US banking sector, pushing other regional banks in the country to the brink of collapse and affecting the stock market and European banks.