According to the New York state financial regulator, the failure of Signature Bank in March was not caused by the institution’s exposure to its crypto clientele but rather by a run on the bank by a diverse group of depositors from a variety of economic sectors. This comes after former U.S. Representative Barney Frank criticized the New York Department of Financial Services (NYDFS) for taking preemptive action relating to the bank’s engagement with the crypto market and the SEC Chair’s latest comment on tying the banking collapse with crypto at a congressional hearing yesterday.
NYDFS Debunks Crypto Exposure Theory
In the Financial Services Committee hearing on stablecoins on Wednesday, NYDFS superintendent Adrienne Harris claimed that not just cryptocurrency clients but also depositors such as wholesale food suppliers, fiduciaries, trust accounts, and legal firms withdrew funds, which ultimately resulted in the untimely bank run.
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While speaking about stablecoins in the ongoing Congressional hearing and their benefits and use-cases in the larger U.S. economy, Harris was quoted as saying:
It is a misnomer that the failure of Signature Bank was related to crypto. The outflow of crypto deposits were in exact proportion to the representation in the depositor base overall.
Adrienne Harris Clarifies Banking Collapse
Harris commented that approximately twenty percent of Signature’s deposits were taken out of the bank on the same evening that Silicon Valley Bank failed. However, those transactions were solely tied to cryptocurrency and the remaining customer withdrawals were from ordinary commercial businesses with uninsured deposits. As a result, Harris explicitly refuted the claim that the failure was due to crypto deposits and the volatility which came with it.
“So it’s of course unfortunate that there was a run on the bank, but it is not the case that the failure Signature was related to crypto”, the superintendent further added.
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