The New York State Department of Financial Services (NYDFS) has clarified that crypto was not responsible for the downfall of Signature Bank.
Speaking at a crypto industry conference on March 5, NYDFS Superintendent Adrienne Harris confirmed that the closure of Signature Bank was due to liquidity issues and not because of its digital asset clients. This contradicts mainstream media reports that blamed crypto for the bank’s closure.
Federal regulators shuttered Signature Bank in mid-March, citing concerns about systemic risks posed by the crypto-focused bank. However, Harris explained that the bank’s failure was due to a “new-fashioned bank run,” as Signature had a high percentage of uninsured deposits and lacked liquidity management protocols to meet withdrawal requests.
Signature Bank had around $4 billion of deposits related to its crypto asset banking business, according to the Federal Deposit Insurance Corp (FDIC). Despite this, Harris does not view crypto as the root of all evil, unlike some other regulatory agency chiefs.
U.S. regulators have been heavily targeting crypto this year following the collapse of FTX in November. Financial regulators are trying to protect the traditional banking system from the threat posed by decentralized forms of money. However, Harris dismissed the notion that regulators are plotting to kill crypto and cut it off from the banking system.
Harris had a positive outlook toward crypto but acknowledged that the sector lacks maturity, especially in areas such as Bank Secrecy Act-anti-money-laundering compliance and cybersecurity. She expressed her eagerness for the day when these systems mature and scale as the business side does.
