On Tuesday, the U.S. Senate Committee on Banking, Housing, and Urban Affairs, also known as the Senate Banking Committee, held a hearing to discuss the recent bank collapses in the United States and the regulatory response. Throughout the testimonies, digital assets and crypto businesses were mentioned. Senate Banking Committee chairman Sherrod Brown claimed on Tuesday that Signature Bank “found itself in the middle of Sam Bankman-Fried’s crime spree at the crypto exchange FTX.”

Regulators Highlight Bank Exposure to Crypto Asset Businesses in Senate Banking Committee Hearing About Bank Failures

Following the collapse of Silvergate Bank, Silicon Valley Bank, and Signature Bank, the Senate Banking Committee held a hearing to discuss the situation and its implications. The hearing witnesses included Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC); Michael Barr, vice chairman for supervision with the Board of Governors of the Federal Reserve; and Nellie Liang, the Treasury’s domestic finance undersecretary, in addition to committee chairman Sherrod Brown and ranking member Tim Scott.

Senate hearing on recent bank failures happening now. All 3 witnesses are folks I named as architects of OCP2.0https://t.co/xRQ8LONpGA

— nic 🌠 carter (@nic__carter) March 28, 2023

“Right now, none of the executives who ran these banks into the ground are barred from taking other banking jobs, none have had their compensation clawed back, none have paid any fines,” explained Brown. “Some executives have decamped to Hawaii. Others have already gone on to work for other banks. Some simply wandered off into the sunset.” The chairman of the Senate Banking Committee revealed that he is preparing legislation that will enhance regulators’ capacity to enforce fines and penalties, reclaim bonuses, and prohibit executives who are responsible for bank failures from ever working at another bank again.

wow.. Barr tells Senate Banking that SVB told regulators $100b was going to fly out the door on Friday… after $42b fled on Thursday, leading to the bank’s closure. If you don’t think we’re in a new world of potential hyper-speed bank runs, you’re not paying attention.

— Steve Liesman (@steveliesman) March 28, 2023

The FDIC chairman, Gruenberg, discussed the exposure to cryptocurrency businesses in connection to the bank failures. Gruenberg talked about how Silvergate Bank stated that it held “$11.9 billion in digital asset-related deposits” and had “less than 10 percent of total deposits” exposed to FTX. The chairman also mentioned the crypto asset clientele of Signature Bank, as well as the digital currency settlement systems of both Silvergate and Signature. Gruenberg noted that these banks held long Treasuries and were unprepared for the interest rate increases that followed the Covid-19 pandemic.

“A common thread between the collapse of Silvergate Bank and the failure of SVB was the accumulation of losses in the banks’ securities portfolios,” Gruenberg said.

The chairman of the FDIC stated that the situations involving both Signature Bank and Silicon Valley Bank “warrant further extensive examination by both regulators and policymakers.” Michael Barr of the Federal Reserve added that SVB’s downfall was caused by its management’s inability to cope with interest rate adjustments and a bank run. “SVB failed because the bank’s management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors in a period of less than 24 hours,” Barr emphasized.

Barr stressed the importance of developing the current comprehension of banking “in light of evolving technologies and emerging risks.” He stated that the Federal Reserve was “analyzing” recent incidents and variables such as “customer behavior, social media, concentrated and novel business models, rapid growth, deposit runs, interest rate risk, and other factors.” The U.S. central bank representative added that, with all of these new and emerging variables, regulators must reconsider how they supervise and regulate financial institutions in the United States. “And for how we think about financial stability,” Barr concluded.

What do you think about the Senate Banking Committee hearing about the bank failures? Share your thoughts about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Binance CEO Changpeng ‘CZ’ Zhao has rejected allegations from the Commodities Futures and Trading Commission complaint, arguing the company “does not trade for profit or ‘manipulate’ the market under any circumstances.”

The chief executive shared his first official response to the lawsuit in a March 28 blog post.

My Response to the CFTC Complaint | Binance Blog https://t.co/TadyotM7HN

— CZ Binance (@cz_binance) March 27, 2023

The CEO argued that while Binance “trades” in a number of situations, this is mainly to convert them “from time-to-time” to cover expenses in fiat or other cryptocurrencies, as its revenues are in crypto.

“Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time to time to pay for my personal expenses or for the Card.”

Zhao also noted that Binance has a 90 day no-day-trading rule for employees, adding: 

“This is to prevent any employees from actively trading. We also prohibit our employees from trading in Futures.”

He went further to state that employees are restricted from buying or selling coins where they’ve obtained “private information” about them.

“I observe these policies myself strictly. I also never participated in Binance Launchpad, Earn, Margin, or Futures. I know the best use of my time is to build a solid platform that services our users,” he add

Zhao called the recent CFTC filing both “unexpected and disappointing,” as it had been working cooperatively with the regulator for over two years. He also noted that the complaint “appears to contain an incomplete recitation of facts.”

Regarding the compliance allegations, CZ says Binance.com has developed “best-in-class” technology to ensure compliance and currently has more than 750 people working to ensure their business operates within the bounds of anti-money laundering (AML) and know your client (KYC) laws:

“To date, we have handled 55,000+ LE requests, and assisted US LE freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far.”

Related: CFTC calls ETH a commodity in Binance suit, highlighting the complexity of classification

CZ also pointed out that Binance.com holds 16 licenses to offer digital asset trading services, the most of any cryptocurrency trading platform.

This is a developing story, and further information will be added as it becomes available.

Hong Kong’s Secretary for Financial Services and Treasury has revealed that more than 80 crypto companies have expressed interest in establishing a presence in Hong Kong. They include companies across mainland China, Canada, European Union countries, Singapore, the U.K., and the U.S. “We attach great importance to virtual asset (VA) and Web3,” said the government official.

80 Crypto Companies Interested in Hong Kong

Hong Kong Secretary for Financial Services and the Treasury Christopher Hui revealed during a speech at the Aspen Digital Web 3 Investment Summit earlier this week that more than 80 crypto firms have expressed interest in establishing a presence in Hong Kong.

“We attach great importance to virtual asset (VA) and Web3,” Hui stated, emphasizing: “The Government has high-level commitment of developing the sector and providing a comprehensive support system to enterprises which are passionate pioneers and start-ups in this area.”

The official noted that the “Policy Statement on Development of VA,” which the Hong Kong government issued last year, “has been well received by the industry,” elaborating:

As of end-February 2023, Invest Hong Kong has received expressions of interest from over 80 virtual asset-related mainland and foreign companies in establishing their presence in Hong Kong.

Invest Hong Kong (Invest HK) is a government department with a mission to attract and retain foreign direct investment (FDI) to Hong Kong.

“These companies included VA exchanges, blockchain infrastructure companies, blockchain network security companies, virtual currency wallets and payment companies, as well as other projects on building the Web3 ecosystem,” Hui detailed.

Specifically, as of the end of February, Invest Hong Kong has received indications from 23 companies across mainland China, Canada, European Union countries, Singapore, the U.K., and the U.S. that they plan to establish a presence in Hong Kong, the official said.

Hui also mentioned that the Hong Kong government has established a licensing regime for crypto service providers which will go into effect in June, and the Hong Kong Monetary Authority is developing a regulatory regime for stablecoins with the goal of implementing regulations by 2024.

“We have advanced our securities rules to allow regulated intermediaries to offer trading of eligible VA futures ETFs [exchange-traded funds] to retail investors in Hong Kong,” the official further shared, noting:

Within a few months’ time, we are glad to see that three VA futures ETFs have already been listed and traded on the Hong Kong Stock Exchange.

“Hong Kong is well-positioned to be a leading hub for Web3 in Asia and beyond,” Hui claimed, adding: “We have a vibrant fintech ecosystem here in Hong Kong, with over 800 fintech companies offering different kinds of innovative and convenient financial services for members of the public and the business sector.”

Do you think Hong Kong will become a crypto hub? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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