According to the Superintendent of the New York State Department of Financial Services (NYDFS), Adrienne A. Harris, the closure of Signature Bank was not due to its ties to crypto-related businesses. She deemed the assumption “ludicrous” and stated that the bank was closed by regulators due to operational difficulties, such as multiple uninsured deposits and lack of liquidity management protocols for withdrawal requests.
Crypto Not to Blame
Contrary to popular belief, the NYDFS head confirmed that Signature Bank’s relationship with the crypto industry was not the cause of its failure. The department had previously urged companies to separate their customers’ cryptocurrency holdings from their own assets and warned about potential losses. Still, Harris pointed out that the cryptocurrency sector lacks maturity despite its growing popularity, with compliance programs of several firms consisting of “reams of paper” and Excel spreadsheets. She emphasized the need for companies to adopt the right technology such as blockchain analytics tools and to hire trained staff to operate them.
Entities Affected by Signature’s Collapse
Crypto-focused firms who had exposure to Signature Bank incurred multi-million losses due to the closure. Among them were Coinbase, who held $240 million in corporate cash, and Paxos, a blockchain infrastructure platform, who had $250 million stuck. The bankrupt crypto lender, Celsius Network, is scheduled to be compensated for all deposits.
Featured image courtesy of Bloomberg