Assessing the Assessors: Fed and NYDFS Reflect on Supervisory Performance Following March Bank Failures

"California and New York Regulators Close SVB and Signature Banks in Quick Succession, Sparking Panic Among Crypto-Friendly Silvergate Bank Customers"

In a stunning turn of events, three banks that had become synonymous with the crypto industry have closed their doors in quick succession. The first was Silvergate Bank, which announced its voluntary liquidation on March 8. This was followed by the closure of Silicon Valley Bank (SVB) on March 10 by California regulators, and the New York Department of Financial Services (NYDFS) taking action against Signature Bank on March 12. The rapid succession of these events sent shockwaves through the industry, and even prompted a response from U.S. President Joe Biden.

For many in the crypto industry, the closure of these banks was a wake-up call. Silvergate Bank, in particular, was widely regarded as one of the most crypto-friendly banks in the U.S. Its closure was seen as a sign that the regulatory landscape was shifting, and that banks were becoming increasingly wary of dealing with crypto-related businesses. SVB and Signature Bank were also seen as important players in the space, with many crypto startups relying on them for banking services.

The reasons behind the banks’ closures are complex, but there are a few common threads. For one thing, all three banks had significant exposure to the crypto industry. This made them vulnerable to regulatory scrutiny, particularly in the wake of recent high-profile incidents such as the GameStop saga. Additionally, all three banks were facing significant financial pressures. Silvergate Bank, for example, had seen its stock price plummet in recent months, while SVB and Signature Bank were both struggling with bad loans.

Despite the similarities between the three closures, there were also some key differences. Silvergate Bank’s closure was voluntary, and was driven largely by concerns over its exposure to the crypto industry. SVB and Signature Bank, on the other hand, were both shut down by regulators. In the case of SVB, this was due to concerns over the bank’s risk management practices. For Signature Bank, it was due to concerns over its compliance with anti-money laundering regulations.

The closures of these banks have sent shockwaves through the crypto industry, and many are now wondering what the future holds. Some analysts have predicted that we will see a wave of consolidation in the industry, as smaller banks struggle to compete with larger players. Others have suggested that we may see a shift away from traditional banking services altogether, with crypto startups turning to decentralized finance (DeFi) platforms instead.

Whatever the future holds, one thing is clear: the closures of Silvergate Bank, SVB, and Signature Bank are a clear sign that the crypto industry is facing significant challenges. As regulators continue to crack down on crypto-related businesses, it will be more important than ever for companies in the space to stay on top of regulatory developments and ensure that they are in compliance with all relevant laws and regulations.

In the meantime, the industry will be watching closely to see what happens next. Will we see more bank closures? Will we see a shift towards DeFi? Only time will tell, but one thing is certain: the crypto industry is in a state of flux, and those who are able to adapt to the changing landscape will be the ones who come out on top.

Martin Reid

Martin Reid

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