US lawmaker accuses FDIC of using banking instability to attack crypto

by · March 15, 2023

US House Majority Whip Tom Emmer has reiterated concerns that the federal government is “weaponizing” concerns about the banking industry to go after crypto.

In a letter on 15 March, Emmer wrote called on Federal Deposit Insurance Corporation chairman Martin Gruenberg to answer questions about whether the state corporation has specifically instructed banks not to offer services to crypto firms, or suggested doing so could be a “burdensome” task. The Minnesota representative cited claims by Signature Bank board member and former U.S. Rep. Barney Frank, who reportedly called the FDIC move against Signature a “strong anti-crypto message” rather than being based on concerns about the bank’s soundness.

“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented rate hikes, are deeply inappropriate and could lead to broader financial instability,” Emmer said.

Emmer also targeted the administration of Joe Biden, accusing politicians of trying to “strangle digital assets” from the US financial system. The Minnesota representative made similar claims before the collapse of Silicon Valley Bank and Signature Bank, as well as speculating that the US government could “easily weaponize” a central bank’s digital currency as a surveillance tool.

Related: Signature Bank and former executives sued by shareholders for alleged fraud

For many in the space, the recent banking crisis began with Silvergate’s parent company announcing on March 8 that it would “discontinue operations” for the crypto bank. Silicon Valley Bank followed on March 10 with its own failure after a run on deposits. USD Coin (USDC) issuer Circle reported $3.3 billion of its reserves in the bank, causing the stablecoin to be temporarily decoupled from the dollar.

Some lawmakers and those in the space have suggested that the shutdown of Signature Bank could have been a targeted move by government officials against crypto, with Rep. Frank reporting that “there was no insolvency based on the fundamentals” at the time. The New York State Department of Financial Services reportedly said on March 14 that closing the bank had “nothing to do with crypto,” citing the firm’s failure to provide “reliable and consistent data” to the regulator.