Signature Bank closure is politically motivated
3 min readThe Signature Bank is said not to have been closed because of insufficient solvency, but because US regulators want to send a message to the crypto sector. At least that’s what Barney Frank, a board member at Signature Bank and a former congressman, claims. Across from CNBC he said there was “no real objective reason” for the FDIC to seize Signature because the bank was “technically solvent.” “We were chosen to be the poster child for this message.”
Three bankrupt crypto banks in one week
With Signature, the third bank collapsed within just one week. Silvergate and Silicon Valley Bank (SVB) also had to throw in the towel. These banks have been central to the crypto sector. As bridge builders, they provided key financial infrastructure that made it possible to exchange fiat for crypto 24/7.
These banks were therefore essential for institutional investors in particular. After SVB collapsed, Signature also experienced massive withdrawals. Investors panicked and tried to withdraw their deposits from the bank and reallocate them to larger banks. According to Barry, the contagion effect from the SVB is the only reason for the bank run. Shortly thereafter, the authorities took operational control of Signature Bank.
“This was just a way of saying to people, ‘We don’t want you guys trading crypto,'” Frank said in an interview. If the FDIC had agreed to insure all deposits as early as Friday instead of waiting until Monday, Signature would not have been acquired, he explains further. “I think if we had been allowed to open tomorrow we could have gone on.” With the assertion that the US authorities want to set an example, Frank is beating open doors in the crypto space. Crypto venture capitalist Nic Carter described the actions of the US authorities as “political scalp“.
US authorities deny allegations
From the point of view of the authorities, the proximity to the crypto sector did not play a role in the takeovers and closures of the banks. New York Gov. Kathy Hochul described the takeover as a way to avert a bigger crisis that could have hit more banks. “The Signature Bank case is not about a specific sector, but we acted quickly to ensure depositors were protected,” said also Adrienne Harris, head of the New York Financial Regulator.
Bank regulations relaxed since Trump
As a congressman, Barney Frank is best known for his involvement in the so-called “Dodd Frank Act.” This is a law that was drafted as part of the revision of the banking jurisdiction after the 2008 financial crisis. In order to avert further crises in the future, banking regulation was tightened. Under Trump, some of these laws were relaxed again.
One of the changes: Instead of 50 billion, banks must have total assets of over 250 billion US dollars for the stricter rules to take effect. However, Frank does not see the fact that the Signature Bank was below this limit as a reason for the failure of the company. Rather, the laws passed in response to the financial crisis would not have included cryptocurrencies. “Digital currencies were the new element that entered our system,” the 82-year-old said in one interview on Sunday.
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