Cryto Killed The Signature Bank: the Curious & Tragic Tale
Signature Bank was once a great success story in the New York banking industry. The bank had made its name as a leading commercial bank, whose services were sought-after by multi-millionaires, influential businessmen, and even high-ranking US politicians.
But all of this came to a crushing end when the bank collapsed, and U.S. Senator Sherrod Brown had a few things to say about it.
What’s The Real Story?
According to the Senator, the bank’s downfall was due to its embrace of cryptocurrency customers without sufficient safeguards. And while we can certainly sympathize with their enthusiasm for the emerging industry, their oversight was certainly lacking.
Senator Brown said, “Signature Bank significantly exposed itself to significant losses due to its exposure to riskier cryptocurrency accounts.”
So, it appears that the bank was a victim of its own optimism, which can sound fairly reasonable and rational until it’s actually put into practice.
What Measures Should Crypto Banks Take?
When dealing with crypto customers, banks should engage in extra diligence to ensure that the customer’s transactions and financial activities are in line with legal and regulatory requirements.
Banks should also:
- Conduct proper due diligence – carefully investigate the customer’s background and activities
- Keep up-to-date with the latest regulations – ensure that the customer is compliant with any applicable laws and regulations
- Implement preventive measures – banks should implement appropriate security systems and controls to protect against money laundering and other illegal activities
While crypto customers may offer exciting opportunities for banks, the risks need to be managed in order for the bank to survive and thrive.
The Moral Of The Story?
It’s no laughing matter when a bank goes under. But in this case, we can at least be thankful that regulators were able to make sense of what brought about the bank’s downfall.
The next time a bank is on the verge of collapse, it might be useful to look back on this tragic tale and make sure that a similar fate does not befall other financial institutions.
Until then, always remember that safety nets are in place to help you make the right decisions when investing in anything – especially the cryptocurrencies that can offer so much potential but also potential peril.
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