March 31, 2023

US Treasury: "SVB and Signature bankruptcy not linked to cryptocurrency"

  • This point was made by Deputy Minister Nellie Liang
  • Her view is shared by most members of the Financial Services Committee
  • Officials concerned about regulatory gaps and the stability of financial institutions, not cryptocurrencies

On Wednesday, 28 March, the House Financial Services Committee held another hearing on the bankruptcy case of three major banks. Deputy Treasury Secretary Nellie Liang, among others, addressed the meeting and unexpectedly supported the cryptocurrency industry in the process.

Recall that earlier this month, three major US banks promptly "went under". The nuance is that SVB, Silvergate Capital and Signature have worked closely with the cryptocurrency business.

In particular, a board member of the latter said that the institution was shut down as a measure of pressure on the industry. It was later reported that Signature's new owner was to abandon the bank's crypto business entirely. The FDIC denied this, but the "residue remains".

Moreover, at one of the first Senate hearings, a politician explicitly stated that SVB was "busted" because of its ties to the cryptocurrency industry. The same official compared the digital asset market to marijuana.

These sentiments have served to cause some apprehension in the sphere. But fortunately, the US Treasury has a different view. That was the point made by Undersecretary of the Treasury Nellie Liang:

"I don't believe cryptocurrency played a major role in any of these bankruptcies."

But when asked whether digital assets were an indirect factor in the banking panic, Liang chose not to answer directly. She said that SVB was indeed closely linked to the industry, but how exactly this affected its financial position is beyond her judgement.

At the moment, the main view in the committee is that the failure of SVB and Signature was due to classic interest rate risk management. Lawmakers are primarily concerned about the soundness of financial counterparties and "gaps" in the regulatory framework of the Fed and FDIC, not cryptocurrency.

Jack Evans

About the author

I became a crypto asset owner in 2014, when the industry was in its infancy. Before that, I was working in the classic US and European stock markets. Since then, I have gained extensive experience in both cryptocurrency investing and day trading. I am happy to share with readers my experience with crypto exchanges, DeFi and NFT instruments. 

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