New York regulator, Adrienne Harris, recently appeared before the US House Financial Services Committee’s panel to refute the narrative that Signature Bank's failure was associated with cryptocurrency. During the hearing, focused on the development of laws to govern stablecoins, Harris clarified that Signature Bank's collapse was not caused by crypto, but rather due to commercial customers with uninsured deposits leaving the bank when Silicon Valley Bank failed.

Harris was questioned by Subcommittee Chairwoman Maxine Waters who wanted to why Harris was certain that cryptocurrency was not at the heart of Signature Bank's collapse. Harris replied that customers related to the crypto industry accounted for just 20% of Signature’s deposit withdrawals, and that the remaining 80% consisted of regular commercial customers.

The bank’s withdrawal of funds was triggered by a panic attack caused by the Silicon Valley Bank failure and this convinced the superintendent to close the bank and preserve it with the Federal Deposit Insurance Corporation (FDIC). The closure was also a way of proving that banks should not be directly involved with crypto.

This has been a point of criticism from former Rep. Barney Frank, a Signature Bank board member, who believes the NYDFS acted prematurely in closing the bank and creating an unwarranted reputation. The regulator is trying to offload all deposits to other banks to prevent disruption, however, so far the FDIC has not been successful in finding a buyer for the crypto part of the business.

Harris' testimony in front of the financial services committee shows that, contrary to popular belief, the spectacular failure of Signature Bank was not due to its involvement in the digital asset industry, but because of commercial customers anxious to withdraw their money after the Silicon Valley Bank collapse. The regulator is still aiming to find a buyer for the crypto-related services.



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