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.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

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 graphics (1).jpg


In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.


A proposal to allow venture firms to own cryptoassets, first put forward last year, moves closer to law


Plus, crypto secured $1.9 billion in funding last quarter and Ripple acquires a custody provider


Plus, Sotheby’s auctions an EtherRock and telecom giants get in on Web3


Elsewhere, Cowen’s crypto employees moved to StoneX and Nomura’s crypto custody firm CEO stepped down


If DeFi can just figure out how to improve both security and compliance, nothing would stop traditional finance from entering the game


Earnings from Coinbase and Robinhood boosted stock prices, while bitcoin’s open interest hits highs not seen since 2021, 2022