Signature unexpectedly taken over due to crypto-friendly stance? NYDFS steps in to refute

In recent days, market panic and deposit runs have led to the collapse of three banks in the United States. Among them, the crypto-friendly bank Signature Bank was taken over without warning, as declared in a statement from the Federal Reserve. Barnett Frank, a former congressman and member of the board of directors who helped draft the famous Dodd-Frank Wall Street Reform and Consumer Protection Act, believes this is a regulatory message against cryptocurrencies. Later, a spokesperson from the New York Department of Financial Services (NYDFS) came out to refute this claim.

Regulators Against Crypto?

According to CNBC's report, the sudden closure of Silicon Valley Bank last Friday caused panic among Signature Bank customers, resulting in over $10 billion in withdrawals. The bank's financial report for the fourth quarter of last year revealed that by the end of the year, it only had $5.8 billion in cash on hand, significantly lower than the $29.5 billion level in 2021.

Frank stated that before the incident, Signature had no issues and it was purely market panic that caused this. He told CNBC:

I think part of the reason this happened is that regulators wanted to send a very strong anti-crypto message!

Crypto research firm Messari's founder Ryan Selkis also seemed to agree with this.

Silvergate is still solvent, despite an unprecedented 90 day $12 billion liquidation sparked by a corrupt sitting Senator who coordinated a bank run w/ short sellers.

Signature was healthy. NYDFS went rogue in shutting them down, and surprised even the FDIC.

It's targeted.

— Ryan Selkis 🥷 (@twobitidiot) March 13, 2023

NYDFS Response

According to The Block's report, an NYDFS spokesperson later clarified that the decision to take over the bank and transfer it to FDIC was based on the bank's own situation. During discussions over the weekend, Signature did not provide reliable and consistent data, leading to a severe crisis of trust in the bank's leadership by regulators. NYDFS does not believe Signature could operate safely and soundly on Monday under these circumstances.

NYDFS believes that Signature has many more diverse and important businesses than digital assets, with digital asset operations accounting for only a small part of its overall operations. It emphasized that the decision to take over Signature was unrelated to its digital asset business.

However, what raises curiosity is that Signature's takeover was only announced through a statement, unlike Silicon Valley Bank's immediate announcement of a new CEO to stabilize morale. The outside world seems to be unaware of Signature Bank's situation. However, according to Bloomberg's report, its real-time payment system Signet is still operational, and customers can safely withdraw their deposits.