Scott Shay, the former chairman of Signature Bank, faced criticism from US lawmakers for attributing his company’s failure to cryptocurrency despite reportedly receiving substantial bonuses and stock options.
On May 16, 2023, Shay testified before the Senate Banking Committee, explaining that Signature Bank began accepting deposits from companies involved in the digital asset market in 2018. However, as the sector faced turbulence in 2022, the bank reduced its digital asset deposits. Shay claimed that regulatory authorities took control of Signature Bank following the failure of a bank linked to the digital asset sector, resulting in a withdrawal of $16 billion from the bank.
United States Senator Cynthia Lummis questioned the validity of his prepared testimony regarding the reasons behind Signature Bank’s downfall. Senator Lummis pointed out that Shay did not take responsibility for his actions; instead, he blamed regulators and digital asset depositors.
Senator Elizabeth Warren also criticized Scott Shay and Gregory Pecker, CEO of Silicon Valley Bank (SVB), for allegedly causing the banks to collapse while keeping their financial rewards. Warren raised concerns about existing legislation that allows executives to receive substantial bonuses and stock options even if their banks fail. She argued that this practice is fundamentally flawed, enabling CEOs to take excessive risks without facing personal consequences and shifting the burden onto the general public.
In contrast to Shay’s attribution of Signature Bank’s claims, Adrienne Harris, the superintendent of the New York Department of Financial Services (NYDFS), criticized the notion that cryptocurrency caused the bank’s failure. During a speech at the New York City Chainalysis Links conference, Harris described the events as a “new-fashioned bank run” and called the idea that cryptocurrency was solely responsible for the collapse “ludicrous.”
Additionally, a research study by the Federal Reserve Bank of Chicago (FRBC) linked the cryptocurrency crisis of 2022 to the numerous bank runs and multiple bank collapses that have occurred in recent times. The study identified influential account holders, known as crypto whales, and institutional actors operating on licensed exchanges as key contributors to the crisis. These entities played a significant role in initiating bank runs by conducting extensive withdrawals, exacerbating the crisis and causing widespread market disruption.
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