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Did regulators intentionally cause a run on banks?



Global economic conditions are tightening; interest rates are in flux; and inflation has yet to be curbed. Considering the economic headwinds, the fact that Silvergate Bank, Silicon Valley Bank and other banks are breaking is not surprising. 

But why now? Quickly rising interest rates are extremely disruptive to banking models, but the collapse of these particular banks has raised eyebrows. It just so happens that these banks are important to the crypto industry.

Selective enforcement in service of an agenda

Government agencies often use the selective enforcement of convoluted or unclear rules and regulations to pursue agendas. They can then defend the action by saying that the public’s interest was at stake.

Here’s the analogy: An apartment building needs to be removed for an upcoming freeway expansion project. The choices are to either execute eminent domain, a scenario where the government has the ability to overrule all leases and ownership and take control of the property. This would not be a popular decision with the community. There is another option. The local government could simply not enforce pre-existing regulations around maintenance and upkeep, thus letting the property slip into disrepair.

A government inspector shows up. The property needs major updates or it will have to be condemned. The property owner cannot afford to get the property up to code. And the inhabitants must move and be relocated for their own safety.

This is the way the government works.

The government sets up broad rules and regulations — selectively enforces them — and creates a situation where the outcome they need is achieved. They skirt direct accountability and public ire but achieve the action needed.

Market conditions are the set-up

As market conditions begin to tighten, businesses that are discretionary and speculative suffer first — e.g., businesses such as startups, restaurants and hedge funds. Thus, banks in the tech and crypto sectors become weakened first. Most banks focus on serving specific industries. If a bank’s customers are failing, the bank is in a precarious position.

If a bank is publicly listed, once public investors understand the predicament, the results are catastrophic. SVB tried to raise additional capital via public markets to bail themselves out, but markets caught wind and went short. Depositors fled to “safer” banks. A classic bank run ensued. The market, in effect, prepped the bank for regulatory intervention.

Regulators take full advantage

The failure of Silvergate and SVB and the takeover of Signature have arguably signaled the start of a regulatory effort to actively cull crypto banks. If crypto can be surgically separated from traditional banking, this solves many perceived problems for regulators. Once crypto on-ramps are eliminated, the category can be aggressively regulated without the perception from the public that an investment opportunity is being taken away.

However, this is not a conspiratorial plan. Rather, the regulators are taking advantage of balance sheet weakness and poor banking practices to set up scenarios where it then seems logical that they should intervene. There was no bank run at Signature. Regulators took the advantage of a chaotic situation to pursue an agenda.

Startups, especially crypto startups, are by their very nature speculative. Blockchain at scale is an “unknown quantity” of speculation due to a lack of regulation. Recall the analogy above. The lack of oversight and regulatory direction has led financial institutions that serve tech and crypto companies to push the boundaries.

Because of macro market conditions, that type of experimentation has created a situation that puts these banks on the edge of solvency. As regulators step in to “save the day,” they get a two-for-one deal. They are perceived to have the public’s interest in mind as they eliminate critical functionality for the crypto industry.

Contagion is a meme

No bank can survive a bank run. Fractional banking has led to a system where banks simply do not have the assets to entirely cover customer deposits. If investors begin to question the stability of a bank and start to withdraw deposits, that bank will either fail or need to be bailed out. Contagion is a meme that, like other memes, is built on a deep, potentially uncomfortable truth. Banks are not as stable as the public is led to believe.

Related: Why isn’t the Federal Reserve requiring banks to hold depositors’ cash?

Nic Carter calls this recent regulatory focus on crypto banks “Operation Chokepoint.” However, bank failures accelerated by regulatory targeting destabilize the perceived stability of the entire financial system. We see this as runs on institutions like First Republic — a traditional medium-sized bank — play out. More runs are coming.

Market forces opened the door for regulators to aggressively cull crypto banks through controlled demolition. But the demolition has focused investors on existing deep systemic risks. The controlled demolition might serve the immediate agenda, but contagion is on the brink.

Joseph Bradley is the head of business development at Heirloom, a software-as-a-service startup. He started in the cryptocurrency industry in 2014 as an independent researcher before going to work at Gem (which was later acquired by Blockdaemon) and subsequently moving to the hedge fund industry. He received his master’s degree from the University of Southern California with a focus on portfolio construction and alternative asset management.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Senate Banking Committee Holds Hearing on Recent Bank Collapses, Calls for Tougher Regulations – Regulation Bitcoin News



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.

“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.

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.

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bank executives, bank failures, Banking technology, bonuses, concentrated business models, COVID-19, crypto businesses, customer behavior, deposit runs, Digital Assets, Exposure, FDIC, Federal Reserve, Financial Crisis, Financial Institutions, Financial Regulation, financial stability, fines, Hawaii, interest rate increases, interest rate risk, Legislation, liquidity risk, Martin Gruenberg, Michael Barr, Nellie Liang, novel business models, pandemic, penalties, rapid growth, regulatory oversight, regulatory response, securities portfolios, senate banking committee, Sherrod Brown, Signature Bank, Silicon Valley Bank, Silvergate Bank, Social Media, supervising financial institutions, Tim Scott, Treasury, uninsured depositors

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 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 News about the disruptive protocols emerging today.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Binance CEO CZ rejects allegations of market manipulation



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.

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 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 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 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.

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80 Crypto Firms Interested in Establishing Presence in Hong Kong, Official Says – Regulation Bitcoin News



80 Crypto Firms Interested in Establishing Presence in Hong Kong, Official Says

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.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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