New York State’s financial regulator has denied allegations that cryptocurrency depositors were responsible for the collapse of Signature Bank. The New York State Department of Financial Services (NYDFS) superintendent, Adrienne Harris, made the statement at a hearing about stablecoins held by the House Financial Services Committee on April 18.
According to a Bloomberg report, Harris said that the bank’s liquidity crisis, which led to its collapse, was not caused solely by cryptocurrency depositors but by various depositors withdrawing their funds from the bank. She also noted that only 20% of depositors at Signature Bank were cryptocurrency clients, and 20% of all depositors withdrew their assets, which led to the bank’s liquidity crisis.
Crypto Clients Had Nothing to Do With Signature Bank Failure
“The outflow of crypto deposits was in exact proportion to the representation in the depositor base overall,” Harris said, adding that the bank’s depositors who withdrew their funds came from various sectors, including the crypto industry, food vendors, fiduciaries, trusts, and law firms.
This contradicts claims made by some digital-asset participants who allege that an organized effort by US banking officials and regulators led to the closure of crypto-friendly Signature Bank.
However, Barney Frank, who was on Signature’s board of directors and a former US congressman, suspected the bank’s willingness to engage with crypto companies led to its closure.
The bank had previously announced it was scaling back from serving crypto firms due to regulatory pressure and challenges within the digital asset sector. Regulators took control of the bank after outflows reached billions of dollars during a massive bank run.
This recent statement followed a remark by a former superintendent at the NYDFS, Maria Vullo, who said that New York State regulators did not shut down Signature Bank because of the firm’s crypto clients. Rather, it was the bank’s failure to properly manage its risks and liquidity that led to the regulatory intervention.
The incident, which was not related to cryptocurrencies, nevertheless highlights the importance of effective risk management and compliance procedures in the traditional financial sector. Banks and other financial institutions must keep up with proper management of their assets, so they don’t end up losing their spot in the market and end up being intervented while they find creative ways to excuse themselves and blame the crypto.
