After being shut down by U.S. regulators on Sunday, crypto-friendly Signature Bank director and former Congressman Barney Frank claimed they had “no indication of problems.” They suggested the bank’s closure was a “strong anti-crypto message” from regulators.
Following the Signature director’s comments, the Department of Financial Services (DFS) claimed that the bank’s resolution “had nothing to do with crypto,” according to a report by Fortune Magazine. A Spokesperson for the Department of Financial Services told Fortune:
The decision to take possession of the bank and hand it over to the Federal Deposit Insurance Corp (FDIC) was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday
Regulators Targeted Crypto Banks?
Despite the statements of Signature Bank director Barney Frank, the DFS told Fortune that with large withdrawal requests looming and increasing, the Department of Financial Services worked with board members and executives to evaluate the financial position of the pro-crypto bank. The regulator also evaluated the bank’s ability to meet withdrawal demands from its customers.
According to the banking regulator, the DFS alleges that the bank’s closure was related to its inability to provide “reliable and consistent data,” which led to a significant crisis of confidence in its leadership.
Commenting on the case, Austin Campbell, former chief risk officer at blockchain infrastructure platform Paxos, warned that even if the Signature acquisition were unrelated to the bank’s crypto activities, the DFS’s actions would “damage” its reputation with the crypto industry. He added:
Regardless of what DFS’s intentions were, it was taken extremely negatively by the crypto community, and it will negatively impact trust in the DFS long term.
With over 20 years in the market, Signature Bank became the third regional bank to collapse in a week, following the collapse of other crypto-friendly banks such as Silvergate and Silicon Valley Bank.
The former partner of the fallen bank and US-based exchange Gemini stated that the company had zero customer funds and zero Gemini dollars (GUSD) at Signature. In addition, the company claimed that all Gemini customer dollars are held at JPMorgan, Goldman Sachs, and State Street Bank. They concluded:
We continue to actively monitor counterparty risk due to banking partnerships to prevent any impact to Gemini customers.
The collapse of Silicon Valley and Signature Bank has created a domino effect on the banking sector of the U.S., pushing other regional banks in the country to the brink of a collapse and affecting the stock market and European banks.
Featured image from Unsplash, chart from TradingView.com