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- 1 GAO reports reveals that Signature Bank had $12 billion exposure to the crypto industry
- 2 No solid evidence or parameters that suggest crypto was the reason for Signature Bank’s failure
- 3 Various lawmakers and regulators are trying to blame crypto for Silicon Valley Bank, Silvergate Bank, and Signature Bank’s failure.
U.S. officials have once more pointed out a negative catalyst for Crypto. The United States Government Accountability Office, or GAO, in its preliminary review of Signature Bank and Silicon Valley Bank, has revealed that the deposits of both banks included exposure to the Crypto Industry.
Did the Banks fall because of the Crypto Industry?
GAO released a report on May 11 informing that unstable governance and poor risk management led to the collapse of Signature Bank in March. Although the government agency did not specifically mention Digital Assets being the main reason for the bank’s failure, they did mention that the bank had exposure to the crypto industry.
GAO’s report further said that declining liquidity months prior to failure and exposure to digital assets were the reason for the bank’s failure. FDIC added that the bank management of Signature was unable to understand the bank’s position with liquidity before days and hours of failure.
Silvergate which went into voluntary liquidation in March and is a crypto-friendly bank wasn’t mentioned by the GAO but the reports said that the “Signature Bank” was perceived to be similar. Signature held close to $12 billion related to the Crypto Industry and digital assets which it intended to reduce.
Lack of action from Bank Regulators
At a May 11 hearing held by U.S. lawmakers, they discussed oversight of the failed banks which also included Michael Clements. Michael Clements, Director of financial markets and community investment at GAO said that the bank regulators identified few problems with Silicon Valley Bank and Signature Bank but didn’t show the urgency of taking supervisory actions within time.
Clements in response to a question from Tennessee Representative John Rose said that they are considering whether large deposits from the crypto space had contributed to Signature Bank’s failure or not.
“[Signature] was simply holding deposits and operating the accounts,” said Clements. “Following some of the turmoil in 2022, particularly FTX, some of those deposits did start to fall off.”
A lot of regulators and analysts have put forward their views on the failure of the banks and expressed their opinion on the connection between crypto and Signature Bank. Adrienne Harris, superintendent of the New York Department of Financial Services, termed any connection between Signature Bank’s failure and Crypto as “ludicrous” and described the event being more of a traditional bank run.
Even though with no solid relation many regulators and lawmakers are trying to blame crypto for the collapse of Signature Bank, Silicon Valley Bank, and Signature Bank. Following the bank failures and allegations related to crypto, crypto firms such as BlockFi and Gemini have released statements claiming to have had sufficient funds to offset exposure or no exposure at all.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
