The big scandal behind the closure of Pro-Crypto Signature Bank

Signature Bank, another major crypto-friendly institution, was shut down by regulators on Sunday. The New York financial institution, with a large lending business in the crypto industry, was caught in the “crossfire” of regulators to prevent the spreading banking crisis.

Yesterday, the US central bank (Fed) announced tired that keeping the bank open could “threaten the stability of the entire financial system.” Similar to what was done to safeguard depositors at the failed Silicon Valley Bank (SVB), regulators stated that crypto-friendly Signature Bank would have full access to their deposits. Fed said:

Today, we are taking decisive action to protect the American economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its important roles of protecting deposits and providing access to credit to households and businesses in a way that promotes strong and sustainable economic growth.

After the sudden collapse of Silicon Valley Bank and the third largest bank failure in US history, former congressman and current CEO and board member of Signature Bank, Barney Frank, sees the latest moves by regulators against pro-crypto bank Signature as an “anti-crypto message.”

Regulators shut down signature to attack pro-crypto allies?

According to a CNBC report, the sudden move by US regulators “shocked” executives at Signature Bank. For bank CEO Barney Frank, the manager had “no indication of trouble” before the run of deposits they received on Friday, following the fall of Silicon Valley Bank, until what the former congressman claimed was “pure contagion” from the SVB fall.

Frank co-sponsored the landmark Dodd-Frank Act created to curb the financial sector’s risky activities after 2008. On the current situation, the former authority added:

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.

Did the signature bank have crypto deposits?

Regulators, for their part, are conducting a sales process for the crypto-friendly bank while allegedly guaranteeing customers uninterrupted access to deposits and services. According to Frank, Signature executives have explored “all options” to resolve the issues, including raising capital and gauging interest from potential acquirers.

The bank also claimed that customer deposits linked to digital assets were $16.52 billion, making it one of the few financial institutions to open its doors to accepting crypto asset deposits after entering the industry in 2018.

Also Christopher Whalen of Whalen Global Advisors told The New York Times that this story has more to do with crypto, “a major miscalculation by veteran bankers.”

With the ongoing global financial crisis, Signature Bank’s shares began to fall on Wednesday, March 8, after closing the trading day at $103 on the Nasdaq exchange, now trading at $70 per share.

Three crypto-friendly banks have fallen victim to regulatory politics in less than a month. However, investors seem to be betting more on crypto-assets than the traditional financial system, as the crisis shows no signs of easing.

The global cryptocurrency market capitalization has returned well above the psychological level of $1 trillion. Representing a “safe haven” for investors and regaining confidence in digital assets has seen all major cryptocurrencies flourish and regain previously lost levels.

Featured image from Unsplash, chart from TradingView.com.