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According to the head of NYDFS, the decision to close Signature Bank last month had nothing to do with cryptocurrency.
The head of NYDFS (New York Department of Financial Services) stated that the regulator’s decision to close Signature Bank was due to issues with New York Bank’s liquidity and has no relation to cryptocurrency operations.
Speaking at the crypto industry conference Wednesday, Superintendent Adrienne A. Harris defined “a new-fashioned bank run” in which she described all the events that led Signature Bank to failure last month. The bank had a high percentage of uninsured deposits and lacked liquidity management protocols to meet the withdrawal requests. “The idea that the taking possession of Signature was about crypto and this is ‘Choke Point 2.0’ is really ludicrous,” stated Ms Harris at the Links NYC Conference hosted by Chainalysis Inc.
A few weeks ago, crypto circles were intrigued by talks that Washington was aiming to kill crypto by restricting its access to the banking system, which some sources name “Operation Choke Point 2.0.” Those fears have now been somewhat reduced, as banking stood up to fill the void created after the closure of Silvergate Capital Corp and Signature.
On March 12, the New York regulator placed Signature Bank into receivership with Federal Deposit Insurance Corp. to protect the depositors. Ms Harris, speaking about the crypto sector, stated that the industry still lacks maturity in compliance programs even after it has grown in prominence. During many NYDFS examinations and enforcement actions, her team found many “reams of paper” and Excel spreadsheets in the companies’ compliance programs.
“There is still a lack of maturity around Bank Secrecy Act-anti-money-laundering [compliance] and cybersecurity,” Ms Harris added. “We’re eager for the day when those systems mature and scale as the business side does.”
Ms Harris added that part of having a robust crypto program is opting for the right technology such as blockchain, plus hiring trained professionals to implement them. The NYDFS has raised the digital asset unit staff over the past year, she stated.
The NYDFS is also near to finalising laws on its authority to assess the crypto industry, to keep it more intact with how it assesses insurance and banking sectors. The fees from the firms for examinations would assist in bringing additional resources to the regulator, Ms Harris added.