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Senator Michael Bennet from Colorado said that Signature Bank didn’t make “prudentially sound” decisions while dealing with crypto. Other US lawmakers believe crypto is being made a scapegoat in the failed banking policies of the Fed.
Michael Bennet, the United States Senator from Colorado, recently opened up about the shutting down of crypto-friendly Signature Bank, with the intervention of the Fed and the FDIC.
He said that the bank with crypto clients didn’t make “prudentially sound” decisions while functioning. Speaking before the Senate Finance Committee on Thursday, March 16, Bennet spoke about the close of Signature Bank in discussion with US Treasury Secretary Janet Yellen.
During his discussion, Bennet drew a comparison between the relationship between banks and crypto firms similar to the one between institutions and marijuana dispensaries. Bennet said:
“Signature Bank failed and almost a fifth of its deposits came from crypto. They’re not allowed to do anything with marijuana, but apparently they can lay 20% of this on crypto – a notoriously unstable […] thing that nobody here even understands and where the value of the assets can soar and collapse.”
According to Bennet, crypto wasn’t even as stable as the Marijuana industry, thereby implying that it may have been a factor in the collapse of the Signature Bank.
However, not all US lawmakers are on the same platform when it comes to their views about the Signature Bank shutdown. Former U.S. Representative Barney Frank recently noted that there was no issue with Signature Bank’s solvency before the NYDFS took over.
Using Banks to Weaponize Crypto
Earlier this week on Wednesday, March 15, US Congressman Tom Emmer wrote a letter to FDIC Chairman Gruenberg asking some stern questions over several reports that suggest that the agencies have been weaponizing banks to strike down on the crypto industry.
He said that such measures could have a disastrous effect as they would push these companies to offshore, unregulated, opaque, and unsafe markets.
Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. 👇 pic.twitter.com/fDmaA0XGWv
— Tom Emmer (@GOPMajorityWhip) March 15, 2023
Ark Invest’s Cathie Wood also responded to Tom Emmer’s letter stating that she too believes “regulators are using crypto as a scapegoat for their own lapses in oversight of traditional banking”.
She said that the failure of the banks last week was due to the inability to match securities earnings and deposit rates. Cathie Wood blamed the Fed policy as the primary culprit behind this collapse. Wood further explained:
“Crypto did not force SVB and Signature into bankruptcy. In my view, Fed policy was the primary culprit. Because of a VC funding drought and higher yields on money market funds, deposits left the US banking system. In our view crypto is a solution to the central points of failure, the opacity, and the regulatory mistakes in the traditional financial system. Made the scapegoat for policy mistakes, crypto will move offshore, depriving the US of one of the most important innovations in history”.
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