The New York State Department of Financial Services has clarified that its decision to close Signature Bank had nothing to do with cryptocurrencies, but rather a crisis of confidence in the bank's leadership.
The bank's closure followed regulators shutting down another bank, Silicon Valley Bank, and comments from Signature Bank board member and former U.S. Congressman Barney Frank, who claimed that the decision to close the bank was due to an alleged anti-crypto stance.
The claims against SVB are "not true"
The regulator denied Frank's claims and explained that the decision was based on the bank's current state and its ability to do business safely. In September, nearly a quarter of Signature Bank's deposits came from the cryptocurrency sector, but the bank announced in December that it would reduce its cryptocurrency-related deposits by $8 billion.
Signature Bank was a commercial bank with private client offices that had nine domestic business lines, including commercial real estate banking and digital asset banking. Although a large amount of its deposits came from the cryptocurrency sector, the FDIC, established a successor "bridge" bank to Signature Bank to allow depositors to access their funds.
All SVB users will be compensated
The U.S. Treasury Department and other banking regulators announced Sunday that all depositors of both Signature Bank and Silicon Valley Bank would be indemnified and "no loss will be borne by the taxpayer."
The Dodd-Frank Act, enacted after the 2008 financial crisis to better insulate the banking system from crises, was one of Barney Frank's pioneering initiatives. In an interview, Frank stated that, to his knowledge, the bank's executives were working to provide data to regulators and that he was perplexed by the decision to close the bank.
Frank also believes that cryptocurrencies were a major factor in the regulator's decision to close the bank, although NYDFS has denied this claim and stated that it has been facilitating well-regulated crypto activities for several years and that it is a national model for regulating the space.
In conclusion, Signature Bank's closure was due to a crisis of confidence in its leadership and not cryptocurrencies, as initially claimed by Barney Frank. The bank has announced that it will reduce its cryptocurrency-related deposits by $8 billion.
The FDIC established a successor "bridge" bank to Signature Bank to allow depositors to access their funds. All depositors of both Signature Bank and Silicon Valley Bank will be indemnified and no loss will be borne by the taxpayer.