U.S. Regulators Crack Down on Crypto-Friendly Banks Amid Rising Withdrawal Requests

Is the Closing of Signature Bank Unrelated to Crypto?

As the bank was shut down by US regulators on Sunday, former congressman and pro-crypto Barney Frank stated that the decision was a “strong anti-crypto message” from the authorities. The bank’s resolution, according to the Directorate of Financial Services (DFS), “had nothing to do with cryptocurrency,” Fortune Magazine said.

The DFS asserts that Signature Bank’s demise was caused by its inability to deliver “accurate and consistent data” and satisfy client withdrawal requests, which resulted in a serious crisis of trust in its management. Notwithstanding Frank’s assertions, the banking regulator assessed the pro-crypto bank’s financial standing in light of the impending and rising number of sizable withdrawal requests.

The failure of Signature Bank, a company that had been on the market for more than 20 years, had a cascading effect on the U.S. banking industry, putting other smaller banks in the nation in danger of failing as well as having an impact on the stock market and European banks.

Authorities undermine public trust in the cryptocurrency sector.

Even though the Signature acquisition had nothing to do with the bank’s cryptocurrency activity, Austin Campbell, a former chief risk officer at blockchain infrastructure platform Paxos, has cautioned that the DFS’s actions will “destroy” its credibility with the sector.

It is significant to note that the company’s previous partner, US-based exchange Gemini, said there were no client money and no Gemini dollars (GUSD) at Signature Bank. Also, the business said that JPMorgan, Goldman Sachs, and State Street Bank hold all of the Gemini client funds.

Notwithstanding the DFS’s assertions, the shutdown of the bank has been viewed very adversely by the crypto community and is likely to have a long-term detrimental influence on confidence in the DFS. This discontent has been exacerbated by the failure of other crypto-friendly institutions including Silicon Valley Bank and Silvergate.