NY Financial Regulators Deny Signature Bank Closure Was a Warning to Crypto

According to a Tuesday report, the New York state financial watchdog denied the recent claims that Signature Bank was closed as a warning to the digital assets industry. Signature was shut down on Sunday due to “systematic risks” in a surprise move by US regulators becoming the third major American bank to close in less than a week.

Regulators Deny Signature Bank Closure Was Connected to Crypto

The Sunday closure of the crypto-friendly Signature Bank had nothing to do with digital assets, New York financial regulators reportedly stated on Tuesday. Instead, the decision was reached due to “a significant crisis of confidence in the bank’s leadership” as the bank started posing a “systematic risk” to financial stability.

The denial likely comes as a response to a claim made by one of Singature’s board members, the former congressman Barney Frank, in an interview with CNBC on Monday. Frank stated that the company “had no indication of problems” until the bank run, initiated by the closure of the Silicon Valley Bank, started. Instead, the board member posited that the regulatory action was meant to turn Signature, the largest crypto-friendly bank operational at the time, into a “poster child” and a warning to the digital assets industry.

Between last Wednesday and Sunday, three major US banks got closed, either through voluntary liquidation, or regulatory action. On March 8th, Silvergate Bank ended its journey after months of uncertainty triggered by the collapse of FTX. Two days later, on March 10th, California regulators closed the Silicon Valley Bank, a crucial part of the tech startup infrastructure, and the FDIC moved in to secure deposits.

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Banking Crisis Sends Digital Assets “To the Moon”

The growing uncertainty over the stability of the American banking sector, and the string of setbacks such as the FDIC’s failure to auction off SVB by Sunday evening, caused the stock of banks, both major and minor, to sink with the start of the week. While the decline, sharpest in Monday’s premarket trading, somewhat subsided, most related stocks are still struggling to recover.

In stark contrast, major cryptocurrencies, and digital assets-related stocks, are witnessing a significant rally. Bitcoin’s price rose by about 25% since the fall of Silvergate and stood above $25,000 at the time of writing. Ethereum followed a similar trajectory and was up by more than 20% since last Wednesday. 

The collapse of three banks in less than a week ended a period of stagnation and downward movement witnessed by the cryptocurrency industry since its significant rally in January. The February and early March slowdown was also caused, in large part, by a significant increase in regulatory pressure seen in the form of SEC’s targeting of Kraken’s cryptocurrency staking and Paxos’ Binance-branded stablecoin BUSD.

Editorial note (March 15th, 2023, 3:06 PM EST); The article was edited to improve clarity.

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