Michael Bennet, the Colorado-based US senator, recently discussed the volatility of cryptocurrencies and asserted that institutions affiliated with crypto firms do not make prudent decisions regarding the crypto industry.
Bennet discussed the recent closure of the crypto-friendly Signature Bank with legislators and Treasury Secretary Janet Yellen on March 16 during a hearing of the Senate Finance Committee on President Joe Biden’s fiscal year 2024 budget. The Colorado senator compared the relationship between banks and crypto companies to that of institutions and marijuana dispensaries, which are “frozen out of the financial system” in many U.S. states.
Bennet stated that Signature Bank failed, and nearly 20% of its deposits were in cryptocurrencies. They are prohibited from engaging in any activity involving marijuana. Still, they can wager 20% of this on cryptocurrencies – a notoriously volatile asset whose value can soar and plummet, which nobody here understands.
According to Bennet, crypto was “not even as stable as the cannabis industry,” suggesting it may have contributed to the failure of Signature Bank. However, Signature board member and former U.S. Representative Barney Frank stated that the bank’s solvency was not an issue on March 12, when the New York Department of Financial Services seized possession of Signature.
The failures of Signature Bank, Silicon Valley Bank, and Silvergate Bank, as well as their affiliations to crypto firms, have been discussed by industry experts, regulators, and legislators regarding the potential impact on the United States financial system. Many in the crypto and blockchain space have argued that the government is attempting to “de-bank” crypto companies, which could have far-reaching consequences.