Signature Bank was known for being crypto-friendly, which means that they lent money to companies in the digital asset space and made it possible for people to easily convert cryptocurrencies like Bitcoin into traditional currencies like U.S. dollars. This is important for the growth and mainstream acceptance of cryptocurrencies because it helps connect the crypto world with the traditional financial system.
Now, some people believe that the closure of Signature Bank is part of a larger trend where regulators are targeting banks that work with cryptocurrencies. This has raised concerns among crypto industry insiders who fear that the U.S. government might be trying to stifle the growth of the digital asset industry. They argue that if banks are discouraged from working with crypto companies, it could make it difficult for these companies to operate and for customers to access their services.
Dear God. Barney Frank openly admits that Signature was arbitrarily shuttered despite no insolvency because regulators wanted to kill off the last major pro-crypto bank. Colossal scandalhttps://t.co/Sa25w6Au7b pic.twitter.com/gLuiybHepS— nic carter 🌠 (@nic__carter) March 13, 2023
The closure of Signature Bank followed a series of events that raised suspicions among crypto enthusiasts. For example, just before Signature Bank’s closure, another crypto-friendly bank, Silvergate, closed down voluntarily. This, combined with the increased scrutiny from regulators and lawmakers, has led many to believe that there might be a coordinated effort to target banks that work with cryptocurrencies.
One of the main reasons for this suspicion is the collapse of FTX, a digital asset exchange that went bankrupt in November. This event triggered a wave of regulatory actions against crypto companies, with lawmakers demanding more information about banks’ ties to the industry. Signature Bank and Silvergate were mentioned by name in a letter written by two Democrat senators to the Federal Reserve Chairman, Jerome Powell.
The closure of crypto-friendly banks like Signature Bank and Silvergate has left many crypto companies without access to the traditional financial system. This can create difficulties for crypto exchanges, as their customers need to be able to convert cryptocurrencies into traditional currencies easily. If more banks that work with cryptocurrencies face similar issues, it could hinder the growth and adoption of digital assets.
Some industry insiders, like Cailin Long, the CEO of crypto bank Custodia, believe that the recent closures are just the beginning of a larger wave of efforts to push banks away from the lawful digital asset industry. Other experts, like venture capitalist Nic Carter, have compared the situation to the controversial Obama-era initiative Operation Choke Point, which discouraged banks from doing business with certain companies.
Despite the concerns, there are still some banks that work with cryptocurrencies, such as Mercury and Customers Bank. However, their futures are uncertain and depend on the decisions made by regulators. If the U.S. government continues to crack down on crypto-friendly banks, it could send a message that the country is not interested in being competitive in the digital asset space, which may force innovation to move to other countries or unregulated parts of the economy.
In summary, the closure of Signature Bank has raised concerns about the future of crypto-friendly banks and the growth of the digital asset industry. As regulators and lawmakers continue to scrutinize banks’ ties to cryptocurrencies, the industry will need to adapt and find new ways to connect with the traditional financial system to ensure its continued growth and mainstream acceptance.