- NYDFS denies that its decision to take over Signature Bank was an anti-crypto message, citing the bank’s inability to provide reliable data and a crisis of confidence in its leadership.
- Former congressman Barney Frank, a Signature Bank board member, claims the closure was meant to send a message that banks should not be involved in the crypto industry.
- The NYDFS emphasizes that Signature Bank had a wide range of activities and customers, with its digital asset business representing only a fraction of its overall operations.
In recent days, the New York Department of Financial Services (NYDFS) took control of Signature Bank, transferring its assets to the Federal Deposit Insurance Corporation (FDIC). This move followed California’s
Regulator’s seizure of Silicon Valley Bank and Silvergate Bank’s announcement to voluntarily liquidate its assets.
Signature Bank, like Silvergate, served numerous crypto clients, prompting speculation that the bank’s closure was a message against cryptocurrency. However, NYDFS has rejected these claims, stating that the bank’s closure was unrelated to its dealings with cryptocurrency companies.
The Debate Over the Real Reason for Closure
The New York Department of Financial Services spokesperson clarified that the bank’s closure was due to its inability to “do business safely and soundly on Monday.” The NYDFS had worked with Signature Bank executives to assess its financial position, withdrawal requests, and the bank’s ability to continue normal operations on Monday. However, the bank needed reliable and consistent data, leading to a crisis of confidence in its leadership.
Despite these explanations from the NYDFS, Barney Frank, a former congressman, Signature Bank board member, and an architect of the Dodd-Frank financial regulatory law claimed that regulators had closed the bank to send a message that crypto is toxic. Frank told The Block that he believed regulators wanted to show that banks shouldn’t be involved in crypto.
NYDFS denied these claims, emphasizing that Signature Bank was a traditional commercial bank with a wide range of activities and customers, including small businesses like food vendors at Hunt’s Point, residential mortgage banking, and commercial real estate. The spokesperson said the bank’s digital asset business represented only a fraction of its overall activity.
Recent Bank Failures and Industry Concerns
The NYDFS took control of Signature Bank after it experienced a withdrawal frenzy similar to the one that occurred at the tech-friendly Silicon Valley Bank two days earlier. SVB’s failure marked the second-largest bank failure by asset total in the U.S. Just last week, Silvergate Bank, which counted FTX and other digital asset firms among its clients, said it would wind down operations due to recent industry and regulatory developments. These events fueled concerns and contributed to the run on Silicon Valley Bank.
Due to the recent bank closures, NYDFS Superintendent Adrienne Harris canceled her scheduled appearance at the SXSW conference in Austin, Texas. Harris also stated in a recent interview that the closure of Signature Bank was not due to its role with crypto companies. The spokesperson echoed her statement: “DFS has been facilitating well-regulated crypto activities for several years and is a national model for regulating the space.”
Barney Frank acknowledged that depositors withdrew over $10 billion on Friday, leading to significant withdrawal requests over the weekend. However, he maintained that the bank’s closure was an anti-crypto message, saying, “We became the poster boy because there was no insolvency based on the fundamentals.”
As of September, nearly a quarter of Signature Bank’s deposits came from the cryptocurrency sector. However, the bank announced in December that it would shrink its crypto-related deposits by $8 billion. In response to the NYDFS’ statement, Frank expressed surprise and puzzlement about why the bank was closed, considering that bank executives were working to provide data to regulators.
