Crypto, Regulatory Oversight Both Culpable in Signature’s Collapse, FDIC Chair Admits

The chair acknowledged his agency’s shortcomings in acting sooner to curb the crisis spreading throughout Signature’s operations


FDIC Chair Martin Gruenberg | Source: The Center for American Progress Action Fund (CC license)


The collapse of Signature Bank was largely due to its reliance on uninsured deposits and exposure to crypto, FDIC Chair Martin Gruenberg said Monday.

In a speech before the House Committee on Financial Services, Gruenberg said Signature’s failure to manage its “reckless growth strategy” and inadequate risk management practices contributed significantly to its downfall.

The chair acknowledged his agency’s shortcomings in acting sooner to curb the crisis spreading throughout Signature’s operations. But Gruenberg only partially accepted blame.

He said: “Although fallout from the liquidation of Silvergate and the failure of Silicon Valley Bank was unprecedented and unfolded rapidly, Signature Bank’s poor governance and inadequate risk management practices put the bank in a position where it could not effectively manage its liquidity in a time of stress, making it unable to meet very large withdrawal requests.”

Signature Bank serviced a raft of big players in the crypto industry leading up to its demise, processing fast, round-the-clock payments between member customers, including stablecoin issuer Circle and crypto exchange Kraken. 

The FDIC’s oversight of Signature Bank had already been scrutinized, Gruenberg noted, pointing to a report by his agency’s Chief Risk Officer Marshall Gentry in late April.

Specifically, the report highlighted it would have been wise in late 2021 to reduce the bank’s management component rating to indicate need for improvement.

“Doing so would have been consistent with the FDIC’s forward-looking supervision concept, likely lowering Signature Bank’s Composite rating, and supporting consideration of an enforcement action,” he said.

Shocks across several crypto-friendly US banks over the past six months were precipitated by considerable headwinds for the crypto industry, most prominently the FTX implosion in November. 

Associated contagion has highlighted the potential systemic risk that crypto-linked banking activities pose, Gruenberg said.

Gruenberg’s comments align with previous statements from his agency in March which claimed that while Signature Bank maintained a more varied deposit base, it was fears related to the crypto market that ultimately instigated the bank run.

That was later questioned by the New York State Department of Financial Services. The department pointed out in a report that Silvergate’s liquidity position was insufficient, and that the bank had self-reported misleading data concerning its solvency.

“Additionally, [Signature] failed to understand the risk of its association with and reliance on, crypto industry deposits or its vulnerability to contagion from crypto industry turmoil that occurred in late 2022 and into 2023,” Gruenberg said.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg


The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.


Plus, a dive into crypto’s ever-expanding unicorn club


Also, tokenization continues to grab headlines and one bitcoin miner stock soars Tuesday after inking a big deal


Fifteen million daily failed transactions disappeared from Solana


FTX debtors will pay the IRS $200M, with an outstanding lower priority claim of $685M


I’ve come to the realization that more attention is needed to create and sculpt the digital spaces where we live


The NYSE went down yesterday after a glitch caused a string of erroneous trades. Does DeFi fix this?