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The U.S. Government Accountability Office, or GAO, has released its preliminary review of the failures of Silicon Valley Bank and Signature Bank, including the deposit exposure of the cryptocurrency industry.
In a report released on May 11, the GAO said that “poor governance and poor risk management practices” led to the collapse of Signature Bank in March. The GAO did not explicitly state that digital assets were the cause of the bank’s collapse, but did mention the impact of the cryptocurrency industry along with potential causes.
“Signature Bank was exposed to the digital asset industry and reduced liquidity in the months leading up to the bankruptcy,” the report says. “FDIC officials said Signature Bank management was unable to fully understand the bank’s liquidity status in the days and hours before the crash.”
While the GAO largely left out the cryptocurrency-friendly Silvergate Bank, which was voluntarily liquidated in March, the report says that Signature is “perceived as similar.” In 2022, Signature held about $12 billion in deposits associated with digital asset companies, but set out to reduce its reliance on the cryptocurrency industry.
U.S. lawmakers discussed oversight of failing banks at a May 11 hearing in which GAO director of financial markets and public investment Michael Clements said banking regulators identified problems with Silicon Valley Bank and Signature Bank before they collapsed, but “didn’t step up oversight in time.” .”In response to a question from Tennessee Representative John Rose, Clements said the GAO looked at “large deposits from the digital asset space” and considered whether crypto contributed to Signature’s failure.
“[Подпись] just kept the deposits and managed the accounts,” Clements said. “After some turmoil in 2022, especially FTX, some of those deposits have really started to drop.”
Various regulators have put forward their own views on the potential link between the impact of cryptocurrencies and the collapse of these banks. Adrienne Harris, superintendent of the New York City Department of Financial Services, reportedly called any connection between Signature’s failure and cryptocurrencies “ludicrous”, calling the events more of a traditional bank run.
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Many regulators and legislators continue to refer to the collapse of Signature Bank, Silicon Valley Bank, and Silvergate Bank in discussions about cryptocurrencies. Following bank failures, crypto firms including BlockFi and Gemini released statements claiming they had enough funds to offset the risks or not expose them to risk at all.