According to New York’s financial regulator, the closure of Signature Bank had nothing to do with cryptocurrency. Over the weekend, regulators had shuttered Silicon Valley Bank, leading to a “significant crisis of confidence in the bank’s leadership,” which ultimately resulted in Signature Bank’s closure.
The contrasting comments from a New York State Department of Financial Services spokesperson and Signature Bank board member and former U.S. Rep. Barney Frank, one of the pioneers of the landmark Dodd-Frank Act, which was enacted after the 2008 financial crisis to better insulate the banking system from shocks, has caused many to wonder if the U.S. is falling behind in the crypto race.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank told CNBC on Monday. “We became the poster boy because the technology is new and untested, and it was easy for them to say, ‘Oh, look at these knuckleheads in New York. They don’t even know what they’re doing.’
The decision by the New York Department of Financial Services to close Signature Bank on Sunday and appoint the Federal Deposit Insurance Corporation as receiver was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday. The FDIC declined to comment. Signature Bank did not immediately respond to a request for comment.
“DFS has been facilitating well-regulated crypto activities for several years, and is a national model for regulating the space,” they said.
The spokesperson added that as withdrawal requests ballooned over the weekend, Signature Bank failed to provide reliable and consistent data.
Frank, the founder of DFS, said he was surprised the regulator said the decision to close the bank was not related to cryptocurrency.
“I think that was a factor,” he said in an interview. “I’m puzzled and disappointed that DFS would make that statement.”
He added that he knew bank executives were working to provide data to regulators. “What we heard from our executives is that the deposit situation had stabilized and they would be getting the capital from the discount window and I continue to be convinced that if we had opened on Monday given the announcements of those two policies, we would have been in a reasonably good shape and certainly functional,” he said. Signature was a commercial bank with private client offices with nine national locations.