Former U.S. congressman: regulators have signalled to banks that cryptocurrencies are toxic

Signature Bank had resolved the outflow of deposits by the time the New York state regulator decided to close the financial institution. This was stated by former U.S. congressman Barney Frank, as reported by The Block.

“Panic on the crypto market triggered a withdrawal of funds. By Sunday we had stabilised the situation… But I think regulators, especially in New York, wanted to make clear — crypto is toxic,” the politician contends.

A spokeswoman for the NYDFS at a briefing pointed to the absence of claims against the company’s crypto-related business.

“Signature Bank had a broad depositor base, so the idea that it was a crypto bank is incorrect,” said Superintendent Adrienne Harris.

Over the past weekend, US authorities began the resolution of two crypto-friendly banks — SVB and Signature Bank.

In Frank’s view, the latter would have dealt with the problems on its own. According to the NYDFS, the bank’s assets stood at $110.36 billion with deposits of $88.59 billion.

“They shut us down for no good reason, to show that banks should not deal with cryptocurrencies. We simply became an example,” the politician said.

The former congressman sits on the board of Signature Bank.

According to him, the bank has been negotiating with regulators since Friday. The institution’s clients included a number of major crypto firms such as Circle, Coinbase and Coinshares.

The Republican politician argues that clear rules for cryptocurrencies in the United States are necessary.

“Banks should be strictly regulated with regard to, for example, whether a client holds cryptocurrency that is 100% backed by dollars. This must be verified,” said Frank.

He noted that authorities are eager to sell Signature Bank. In his view, the size of the discount would indicate the presence and depth of potential problems at the financial institution. Yet the former congressman regards the regulator’s complaint as primarily about the bank’s focus on the digital assets industry.

Earlier, Elon Musk said he was prepared to acquire SVB.