Crypto making the headlines again, this time in Signature Bank's collapse investigation. GAO report points towards exposure to digital assets.
The United States Government Accountability Office, or GAO, has released its preliminary review of the failures of Silicon Valley Bank and Signature Bank — and included exposure to deposits from the cryptocurrency industry.“poor governance and unsatisfactory risk-management practices” led to the collapse of Signature Bank in March. The GAO did not explicitly report that digital assets were the cause of the bank’s failure but mentioned exposure to the crypto industry alongside potential reasons.
“Signature Bank had exposure to the digital assets industry and declining liquidity in the months prior to failure,” said the report. “FDIC staff said Signature Bank management was unable to fully understand the bank’s liquidity positions in the days and hours before failure.”in March, the report said Signature was “perceived to be similar.” Signature held roughly $12 billion in deposits connected to digital asset firms in 2022 but intended to reduce its exposure to the crypto industry.
“[Signature] was simply holding deposits and operating the accounts,” said Clements. “Following some of the turmoil in 2022, particularly FTX, some of those deposits did start to fall off.” Different regulators have put forth their own views on the potential connection between exposure to crypto and the collapse of these banks. Adrienne Harris, superintendent of the New York Department of Financial Services, reportedly
between Signature’s failure and crypto was “ludicrous,” describing the events as more of a traditional bank run.Many regulators and lawmakers continue to invoke the collapses of Signature Bank, Silicon Valley Bank, and Silvergate Bank in discussions around crypto. Following the bank failures, crypto firms including BlockFi and Gemini released statements claiming to have had sufficient funds to offset exposure or no exposure at all.
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