The crypto-friendly Signature Bank made a significant reduction in digital asset deposits due to increased volatility and regulatory concerns towards the end of last year, according to its former chairman and co-founder, Scott Shay. In a recent prepared testimony, Shay recounted a series of extraordinary and unprecedented events that led to the bank’s present situation.
Shay is scheduled to testify before the Senate Banking Committee, along with former Signature Bank President Eric Howell and former Silicon Valley Bank CEO Gregory Becker. It’s worth noting that Silicon Valley Bank failed just days before Signature Bank in March of this year.
Despite the failures of other banks and the withdrawal of billions from Signature’s depositors, Shay maintained his confidence in the institution. He claimed that the bank always remained solvent, with assets well in excess of liabilities, even at the very end. Shay also revealed that they had a well-defined and solid plan to continue operations and withstand additional withdrawals.
However, the New York Department of Financial Services (NYDFS) announced on March 12 that it had taken possession of Signature Bank in order to protect depositors. Although Shay disagreed with the regulator’s decision, he recognized the important role that bank regulators play in the financial system.
The collapse of Signature Bank, Silicon Valley Bank, and Silvergate Capital – three crypto and tech-focused banks – within days of one another in March, had a significant impact on the crypto industry. Some critics claimed that the government intentionally targeted the crypto sector with bank closures.
However, NYDFS Superintendent Adrienne Harris countered this sentiment at a conference last month, where she addressed the matter of Signature Bank’s possession. Harris dismissed the notion that the event had anything to do with crypto or was a “Choke Point 2.0” strategy, calling such claims “ludicrous.”
The situation raises the question of whether regulatory intervention and banks’ decisions to cut back on digital asset deposits are truly necessary for maintaining financial stability and protecting depositors, or whether they inadvertently stifle the growth and innovation of the burgeoning crypto and blockchain industry. While the answer may lie somewhere in the middle, it’s crucial to strike a balance between regulation and fostering technological advancements to ensure a thriving ecosystem for all stakeholders involved.
Source: Cryptonews
