Ex-congressman and the man behind the Dodd-Frank Act Barney Frank has said Signature Bank was shuttered in part to attack the digital asset industry.
The former lawmaker, a Signature Bank board member, said in a Monday interview with CNBC that regulators targeted the bank to send an “anti-crypto message.”
New York regulators decided to abruptly shut down crypto-friendly Signature Bank on Sunday, citing system risk—which surprised management at the firm, according to a Bloomberg report. It is the third-largest bank failure in U.S. history. Regulators have not yet provided any further reasoning for shuttering the bank.
The move came after Silicon Valley Bank—to which a number of crypto companies had exposure—went belly up after suffering a $42 billion bank run days before. The same week, crypto-friendly Silvergate said it was winding down operations.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” he was quoted saying by CNBC. He added that the bank was the “poster boy” for the crypto industry.
Signature Bank gave crypto companies loans. America’s biggest digital asset exchange Coinbase said Friday that it held a corporate cash balance of around $240 million with Signature Bank. Stablecoin issuer and crypto brokerage firm Paxos admitted holding $250 million at Signature Bank.
Signature Bank’s shutdown now means that mainstream crypto companies are once again locked-out of the traditional finance system—something that crypto exchanges, in particular, require so that their customers can buy assets like Bitcoin and cash out to U.S. dollars.
Frank was one of the people behind the Dodd-Frank Act, which overhauled U.S. banking regulation to prevent another global crash following the 2007-2008 financial crisis.
The Biden Administration has insisted that the move to protect depositors (known as a systemic risk exception) is not a “bailout,” and that the taxpayer will not incur any of the burden. But the intervention has been described by others in this way—such as The Wall Street Journal, which today called it “a de facto bailout of the banking system.”