Signature Bank was seized to send a message to other banks that ‘we don’t want you to deal with crypto,’ the director said.

A regulatory takeover of a New York-based bank is intended to send a message to US banks to stay away from the cryptocurrency business, a former member of Congress who is on the bank’s board said.

Former US Rep. Barney Frank said Monday that he believes that the state officials behind the action are trying to make an example of Signature Bank.

“It’s just a way to tell people, ‘We don’t want you to deal with crypto,'” Frank told The Associated Press in a phone interview.

Frank, a Democrat who served in Congress from 1981 to 2013, coauthored the Dodd-Frank act that increased government oversight of banks after the 2008 financial crisis.

He was a director of Signature Bank until the New York Division of Financial Services took it over on Sunday and gave its control to the FDIC, the federal agency that insures bank deposits, until the bank is sold.

Getting the signature came two days later regulators seized California-based Silicon Valley Bank. Both follow a rush to withdraw from banks, which cater to technology businesses.

Described by New York Gov. Kathy Hochul the takeover as a way to avoid a bigger crisis that could affect many banks.

“Our view is to make sure that the entire banking community here in New York is strong, that we can be calm,” Hochul said at a news conference Monday.

Signature, founded more than two decades ago, has about 40 offices across the US and says it focuses on banking for privately owned businesses, their owners and seniors. managers.

The bank says it is the first FDIC-insured bank to launch a blockchain-based digital payments platform.

As concerns grow Silicon Valley Bank last week, Signature released a statement seeking to reassure clients and investors that it is stable. The statement includes a reminder that despite its efforts to take care of cryptocurrency holders, it “does not invest in, does not sell, does not hold, does not take custody and does not lend against or make loans guaranteed by digital assets.”

But on Friday, there were more withdrawals, which Frank said were “solely based on contagion from SVB.”

He said the situation had stabilized by the time Sunday’s New York regulators took over.

The bank had more than $110 billion in assets, making it the third largest bank failure in US history.

Unlike Frank, Hochul did not point to cryptocurrency as a reason for closing the bank over the weekend. He said the withdrawals continued, requiring action.

And the state regulator went further, saying that Signature is not a crypto bank.

“This is not about a particular sector in the Signature Bank case, but we acted quickly to ensure that depositors are protected,” said New York Superintendent of Financial Services Adrienne Harris.

The bank’s top executives were fired and it reopened Monday under FDIC operational control as Signature Bridge Bank.

Also Monday, the FDIC announced that those who have deposits in both banks have full access to it — even amounts that exceed the standard $250,000 insurance limit.

Frank said that if the FDIC had agreed to insure all deposits on Friday instead of waiting until Monday, Signature would not have been obtained. He said the insurance limit for businesses should also be permanently raised by Congress to an amount large enough to cover several months worth of wages for most companies.

Frank said that the former bank operators have no recourse.

But he said he expects some vindication when the bank is eventually sold.

“I think they’re going to get a really good price,” Frank said, “proof that it wasn’t a bank problem.”

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