Fleeing Crypto Depositors Didn’t Bring Down Signature, NY Regulator Says

Apr 19, 2023


(Bloomberg) -- Signature Bank’s collapse in March was not caused by its crypto clients, but a run by a broad base of depositors across business sectors, according to New York state’s financial regulator. 

“It is a misnomer that the failure of Signature Bank was related to crypto,” said New York State Department of Financial Services Superintendent Adrienne Harris in a House Financial Services Committee hearing on stablecoins on Wednesday. Depositors including wholesale food vendors, fiduciaries, trust accounts, law firms left the bank and caused the run, she said. 

“The outflow of crypto deposits were in exact proportion to the representation in the depositor base overall,” Harris said. During the bank run on that Friday, about 20% of the deposits left the bank, of which 20% were from crypto clients, she said. New York shuttered the bank over the following weekend. 

Some digital-asset adherents have claimed that an organized effort by US banking officials and regulators led to the closing of crypto-friendly Signature. The Blockchain Association, whose members include Circle Internet Financial and Kraken, said last month it was digging into allegations that digital-asset firms are being booted from the US banking system.   


Signature banked a “healthy proportion of crypto customers” and the bank had already announced it was scaling back from serving crypto firms, she said. 

Signature Bank was seized by the government in March after regulators lost faith in management and depositors fled, the New York DFS has previously said. However, Barney Frank, who was on Signature’s board of directors and a former US congressman, has said he had a different perspective on how events unfolded and suspected the bank’s willingness to engage with crypto companies led to its closure.  

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