Regulators shut down Signature Bank on March 12, citing “system risk,” marking the third-largest bank failure in U.S. history within days of the second-largest – the collapse of Silicon Valley Bank. A former congressman, who is on the board of Signature, said he believes the decision to shutter Signature was in part to attack the crypto sector. Crypto expert Scott Melker, host of "The Wolf of All Streets" podcast, agreed, saying crypto-friendly Signature Bank was closed as part of an effort by the U.S. government to cripple the digital asset industry.
"Banking crisis has nothing to do with crypto. It was a result of Fed policy and bank mismanagement,"mismanagement," Wolf of All Streets wrote in a March 13 Twitter post. "But the government took the opportunity to close Signature Bank on a weekend to help crush the crypto industry. Absolute insanity."
In a joint statement, Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC Chairman Martin Gruenberg said the Federal Deposit Insurance Corporation (FDIC) is going to ensure that all Silicon Valley Bank and Signature Bank depositors are made whole, according to a release. The statement said that uninsured depositors, as well as shareholders, are not guaranteed to be "protected," but that the U.S. banking system is resilient and on a solid foundation."
Former U.S. Rep. Barney Frank (D-MA), a board member at Signature Bank, said in an interview, "I think part of what happened was that regulators wanted to send a very strong anti-crypto message.”
Decrypt reported that several prominent crypto companies had done business with Signature, including digital asset exchange Coinbase and stablecoin issuer Paxos.
One crypto trader told his 446,000 Twitter followers that the closures of Signature, Silicon Valley Bank and Silvergate within the last two weeks feel like a coordinated attack on the digital asset industry.
"This seems more like a war against crypto than actual flaws in the banking system," the tweet said.
John Reed Stark, former head of the U.S. Securities and Exchange Commission (SEC) said in a tweet that other banks might be scared away from the crypto industry now, which could lead to reduced crypto adoption in the U.S.
"Given Signature/Silvergate failures, any bank doing any crypto-related work poses a systemic threat and faces a 24/7 U.S. regulatory colonoscopy. If there is no way to cash-in casino chips after gambling, people will stop going to casinos. Bye crypto," Stark said.
Silvergate had been one of the main lenders to the crypto industry, along with Signature Bank, before it announced it was entering voluntary liquidation earlier this month, Globe Banner reported. Adam Cochran, founder of the venture capital firm Cinneamhain Ventures (CEHV), said Silvergate Bank's liquidation is not due to its involvement in the crypto industry, but rather was caused by certain Office of the Comptroller of the Currency (OCC) guidelines, its decision to purchase low liquidity bonds and a subsequent bank run.
"Silvergate didn't fail because of crypto risk, or because of illegal actions (that we know of). It failed because it followed the OCC rules for bank partial reserves, bought low liquidity Muni Bonds and then had a bank run. This was a failure of banking, not crypto,” Cochran said.
Podcast host Melker called Silvergate's liquidation "exactly the ammo the government needs to try to cut the crypto industry off from the banking system."