Crypto had no relation to the closure of Signature Bank: New York Finance Regulator

Crypto had no relation to the closure of Signature Bank: New York Finance Regulator

Adrienne A. Harris – superintendent of the New York State Department of Financial Services (NYDFS) – said the premise that the bank’s ties to crypto-related companies were behind its closure was “ridiculous.”

The financial institution experienced serious operational difficulties last month and was shut down by American regulators to prevent further problems.

Crypto wasn't the reason

The head of the NYDFS recently assured thisinterviewthat relevant watchdogs shut down Signature Bank because it had multiple uninsured deposits and lacked liquidity management protocols to meet withdrawal requests.

As such, she completely dismissed the notion that the organization's relationship with the crypto industry had anything to do with its failure:

“The idea that Signature’s seizure was about crypto and this is ‘Choke Point 2.0’ is truly ridiculous.”

On the other hand, the NYDFS has previouslyurgedCompanies to separate customers' cryptocurrency holdings from their own assets as commingling could result in significant financial losses for investors.

“In addition, the department expects a VCE custodian to make its standard disclosures and customer agreements readily available to customers on its website in accordance with New York laws and regulations,” the watchdog added.

Harris spoke at length about the cryptocurrency sector, arguing that despite its growing popularity, it still lacks maturity. She said her team found that many companies' compliance programs in this area consisted of "reams of paper" and Excel spreadsheets:

"There is still a lack of maturity in Bank Secrecy Act anti-money laundering [compliance] and cybersecurity. We look forward to the day when these systems mature and scale as the business side does."

She said such companies need to deploy the right technology, including blockchain analytics tools, and hire trained staff to run them.

The companies affected by Signature's collapse

The closureTriggeredMillions in losses for many crypto-focused companies since they became involved with the bank. US-based exchange Coinbase held $240 million of company funds in Signature, while blockchain infrastructure platform – Paxos – stuck $250 million.

Bankrupt crypto lender – Celsius Network – is next on the list. The Unsecured Creditors Committee said all depositors would be “made whole”.

Featured image courtesy of Bloomberg

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