Signature Bank, another major crypto-friendly institution, was shut down by regulators on Sunday. New York financial institutions, with large credit businesses in the crypto industry, are caught in the “crossfire” of regulators to prevent the spread of the banking crisis.
Yesterday, the US Federal Reserve (Fed) stated that keeping banks open could “threaten the stability of the entire financial system.” As it did to reassure depositors at the failed Silicon Valley Bank (SVB), regulators announced that crypto-friendly Signature Bank will have full access to deposits. The Fed said:
Today we are taking decisive action to protect the US economy by strengthening public confidence in our banking system. This step will ensure that the US banking system continues to play an important role in protecting deposits and providing access to credit for 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 member of Congress and current director and board member of Signature Bank, Barney Frank, sees the recent move by regulators against the pro-crypto bank Signature as an “anti-crypto message.”
Regulator Kills Signatures To Attack Pro-Crypto Allies?
According to CNBC report, the sudden move by US regulators “surprised” executives at Signature Bank. For the director of the bank Barney Frank, the executive had “no indication of a problem” until the open deposits were received there, after the fall of the Silicon Valley Bank, for what the former congressman claimed was “pure contagion” from the fall of SVB.
Frank co-sponsored the landmark Dodd-Frank Act created to curb the risky activities of the financial sector after 2008. In the current situation, a former government official added:
I think part of what’s happening is that regulators want to send a very strong anti-crypto message. We are the poster child for not having fundamental-based insolvency.
Do Banks Have Crypto Deposits?
Regulators, for their part, are conducting a sales process for crypto-friendly banks while reportedly ensuring uninterrupted access to deposits and customer service. According to Frank, Signature executives have explored “all options” to solve the problem, including raising capital and gauging interest from potential acquirers.
The bank also stated that customer deposits related to digital assets amounted to $16.52 billion, making it one of the few financial institutions that opened its doors to accept crypto asset deposits after entering the industry in 2018.
Additionally, Christopher Whalen of Whalen Global Advisors toward New York Times that this story is related to crypto, “a huge miscalculation by veteran bankers.”
With the ongoing global financial crisis, Signature Bank shares began to decline on Wednesday, March 8, after closing the trading day at $103 on the Nasdaq Stock Market, now trading at $70 per share.
Three crypto-friendly banks have fallen victim to regulatory policies in less than a month. However, investors seem to be betting more on crypto assets than traditional financial systems, as the crisis shows no signs of easing.
The global cryptocurrency market capitalization has returned above the psychological level of $1 trillion. Representing a “safe haven” for investors and gaining confidence in digital assets has caused all major cryptocurrencies to grow and gain previously lost levels.
Featured images from Unsplash, charts from TradingView.com.