On Tuesday, the New York Department of Financial Services said that Signature Bank was not closed because of cryptocurrency, refuting claims that the regulator seized the bank to send an anti-crypto message.
Over the weekend, NYDFS acquired Signature and transferred it to the Federal Deposit Insurance Corporation. (FDIC). Last Friday, California’s banking regulator seized Silicon Valley Bank, and the next week, Silvergate Bank said it would liquidate its assets on its own.
In a statement on Tuesday, a spokesperson for the NYDFS repeated what the agency’s head, Superintendent Adrienne Harris, had said the day before: that the bank’s closing was unrelated to its work with cryptocurrency companies.
The NY DFS seized #SignatureBank under Section 606 of the New York Banking Law. Here’s the list of reasons justifying seizure. They are pretty wide-ranging. https://t.co/xY7TQVsltd. pic.twitter.com/zG5xv5FUFA
— Frances ‘Cassandra’ Coppola (@Frances_Coppola) March 14, 2023
The spokesperson stated that the decisions taken over the weekend were unrelated to cryptocurrency. Signature was a traditional commercial bank with a wide range of activities and clients, including small businesses like food vendors at Hunt’s Point, residential mortgage financing, and commercial real estate, to name a few. DFS has facilitated well-regulated crypto activities for years and is a national paradigm for regulating the space.
Barney Frank, a Signature Bank board member and former lawmaker whose name appears on the 2010 Dodd-Frank Act and who supported a 2018 amendment to the law, said that he believed regulators shut down Signature Bank because it served cryptocurrency clients.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message. We became the poster boy because there was no insolvency based on the fundamentals,” Frank told CNBC.
The NYDFS said in a statement that the bank still had significant withdrawal requests after a rush of deposits on Friday.
Frank admitted that depositors withdrew more than $10 billion on Friday.
According to DFS, the bank failed to provide consistent and reliable data, leading to a significant crisis of confidence in the bank’s leadership. The decision to seize the bank and turn it over to the FDIC was made only when it became evident that the bank would be unable to conduct business safely on Monday. The Department is still working with federal regulators and other officials to find out who is to blame for the recent events and hold them accountable.
