Ex-House Rep blames outsiders for linking crypto to bank’s collapse

Barney Frank, a former member of the United States House of Representatives and a board member of Signature Bank, has accused some members of the public for the bank’s collapse.

During a hearing before the New York State Senate on May 30, Frank claimed that he had “no mea culpas” regarding the failure of Signature Bank. He argued that the bank’s dealings with cryptocurrency were “safe and sound” before regulators intervened. Frank also suggested that the bank acted as a facilitator for crypto rather than investing directly in digital assets and that some members of the public failed to understand this distinction.

Regarding the collapse of Signature Bank, Frank said, “It wasn’t that people who were in the digital business themselves panicked, it was other people who didn’t understand the business but were frightened by it. Unfortunately, a lot of uninsured depositors were hostile to crypto and made the mistaken guilt-by-association of us and Silicon Valley.”

The New York Department of Financial Services took control of Signature Bank in March, despite claims from Frank and others that the bank was not insolvent at the time. The bank’s collapse followed the failure of Silicon Valley Bank and the shutdown of Silvergate Bank, both of which were connected to crypto firms.

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During the hearing, Frank also stated that the bank’s assets, capital, and loan portfolio were all fine at the time of the shutdown, and the only problem was “crypto-fear inaccurate withdrawals.”

The New York Senate hearing was one of the first at the state level exploring the failure of the crypto-friendly bank. Lawmakers at the federal level convened in March to discuss the events leading to the collapse of Silicon Valley Bank and Signature Bank. Digital assets could arise as a policy position ahead of the 2024 primaries and elections across the United States.

Financial regulators in New York are often at the forefront of crypto industry-defining policies due to the available capital and businesses setting up shop in the state. Former FTX CEO Sam Bankman-Fried will face his criminal trial in New York starting in October, and the state’s Department of Financial Services has been behind investigations and enforcement actions of several crypto firms since implementing its BitLicense regime in 2015.