Michael Bennett, a US Senator representing Colorado, suggested that banks associated with crypto firms were not making “prudent” decisions.
Speaking at a March 16 Senate Finance Committee hearing, Bennett mentioned the recent shutdown of crypto-currency Signature Bank with lawmakers and Treasury Secretary Janet Yellen during US President Joe Biden’s fiscal year 2024 budget discussions. The Colorado senator drew a comparison between the relationship of banks and cryptocurrency companies with the relationship of institutions and dispensaries for the sale of marijuana, a legal service in many US states that is “frozen out of the financial system.”
“Signature Bank failed and almost a fifth of its deposits came from crypto,” Bennett said. “They are not allowed to do anything with marijuana, but apparently they can mortgage 20% of this amount to cryptocurrency – notoriously unstable […] a thing no one here even understands and where asset values can go up and down.”
According to Bennett, the cryptocurrency was not “even as stable as the marijuana industry”, which means that it could have been a factor in the collapse of Signature Bank. However, Signature board member and former US Representative Barney Frank said there were no solvency issues at the time the New York City Department of Financial Services took control of the bank on March 12.
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The collapse of Signature Bank, Silicon Valley Bank, and Silvergate Bank and their ties to crypto firms have been part of the debate among industry experts, regulators, and lawmakers over the potential impact on the US financial system. Many in the cryptocurrency and blockchain space have speculated that government officials have been trying to “debankrupt” cryptocurrency companies, which could have far-reaching consequences.
