The New York State Department of Financial Services has spoken out about the role of crypto in the downfall of Signature Bank. Contrary to the current wave of attacks on the industry in the United States, it’s not all bad news.
Speaking at a crypto industry conference on March 5, NYDFS Superintendent Adrienne Harris confirmed that crypto was not the cause of the closure.
Federal regulators shuttered Signature Bank in mid-March, citing concerns about systemic risks posed by the crypto-focused bank. However, mainstream media blamed crypto in its usual flurry of FUD following the events.
Harris confirmed that the action was due to the bank’s liquidity, not because it had digital asset clients.
Furthermore, she described the events leading up to the failure as “a new-fashioned bank run.” Signature had a high percentage of uninsured deposits and lacked liquidity management protocols to meet withdrawal requests, she said.
Signature Bank had around $4 billion of deposits related to its crypto asset banking business, according to the Federal Deposit Insurance Corp (FDIC).
Don’t Blame Crypto for Signature Bank
U.S. regulators have been heavily targeting crypto this year following the collapse of FTX in November. Decentralized forms of money pose a threat to the traditional banking system, and financial regulators are trying to protect that institution.
However, Harris is one of the few that does not see crypto as the root of all evil. According to the WSJ, she said:
“The idea that the taking possession of Signature was about crypto and this is ‘Choke Point 2.0’ is really ludicrous.”
“Operation Choke Point 2.0,” refers to the notion that regulators are plotting to kill crypto and cut it off from the banking system.
Harris had a more positive outlook toward crypto than other regulatory agency chiefs. However, she said that the sector lacks maturity.
“There is still a lack of maturity around Bank Secrecy Act-anti-money-laundering [compliance] and cybersecurity. We’re eager for the day when those systems mature and scale as the business side does.”
Crypto Market Outlook
Markets have declined slightly today, with a 1.3% slide in total market capitalization. As a result, the figure currently stands at $1.19 trillion.
However, the weekly outlook remains range-bound.
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