SIGNATURE BANK: AN END TO CHOKING CRYPTOCURRENCY?

According to reports, Adrianne Harris, head of the New York Financial Services Department (NYDFS), stated that Signature Bank’s acquisition last month was not part of any so-called Choke Point 2.0. She called the idea absurd and ridiculous, and the decision to intervene and close Signature had nothing to do with cryptocurrency. The idea of regulators attempting to debank cryptocurrency was foolish.

NYDFS Director: The idea of regulatory agencies attempting to debank cryptocurrencies is foolish

Cryptocurrency has been an up and coming industry for the past decade. This digital currency has gained immense popularity worldwide, and the infrastructure supporting this decentralized system continues to grow. However, governments and financial institutions have struggled to keep up with the rapid pace of innovation brought by cryptocurrency. The past few years have seen authorities attempting to regulate cryptocurrency transactions by imposing sanctions on companies dealing with cryptocurrency. One such incident that made headlines recently was the closure of the Signature Bank, which had led to speculation that regulators are attempting to debank cryptocurrency. In this article, we explore the situation surrounding the New York Financial Services Department’s action against the Signature Bank, and analyze the allegations of debanking cryptocurrency.

The Closing of Signature Bank

In February 2021, the NYDFS ordered Signature Bank to close the accounts of one of its clients, someone accused of fraud. According to reports, the department’s investigation revealed that the bank provided inadequate customer identification and transaction monitoring. Adrianne Harris, head of the NYDFS, made a statement that the move to intervene and close the accounts had nothing to do with cryptocurrency. She labelled the idea of regulators attempting to debank cryptocurrency as “foolish,” adding that the decision to close Signature Bank had nothing to do with cryptocurrency.
##The Choke Point Controversy
The term “Choke Point” was coined when the financial watchdogs of the US government, which include agencies such as the Federal Reserve and FDIC, scrutinized and closed the bank accounts of companies deemed to be high risk. Certain industries, including pornography, online gambling, and pharmaceuticals, were particularly affected by the action. Choke Point had several critics who viewed it as overreach by regulators who had wanted to influence business practices indirectly.

Choke Point 2.0

Choke Point resurfaced in 2017 with a new version, allegedly aimed at debanking cryptocurrency. The Department of Justice was reported to have concentrated on “problematic” actors in the cryptocurrency industry, such as exchanges and payment processors. This version of Choke Point particularly targeted bank accounts of individuals and companies that convert cryptocurrencies into and out of legal tender. However, Adrianne Harris denies claims that this is the case. She stated that the idea of regulators attempting to debank cryptocurrency is “absurd” and the move to intervene and close Signature Bank had nothing to do with cryptocurrency.

The Future of Cryptocurrency

Cryptocurrency has become more mainstream since its inception, and governments worldwide have taken note of its relevance. As laws and regulations are being formulated, individuals, corporations, and start-ups associated with cryptocurrency should brace themselves for more scrutiny by regulators. While some argue that cryptocurrency should operate as an entirely unregulated market, the fact remains that improper use would raise concerns of illegal activities. Hence, it is essential to maintain strong protocols to combat the proliferation of fraud and criminal activity in this sector.

Conclusion

All said and done, we can conclude that the closure of Signature Bank was not part of Choke Point 2.0, as claimed by some in the industry. The move was due to insufficient customer identification and transaction monitoring by the bank, which eventually led to its closure. The idea of regulators attempting to debank cryptocurrency, including Bitcoin and its alternatives, may indeed be absurd; however, this does not mean that regulators will not take necessary action to curb illicit activity in the industry.

FAQs

1. Why was Signature Bank closed?
Ans: The NYDFS ordered Signature Bank to close an account linked to fraud. The decision had nothing to do with cryptocurrency.
2. What is Choke Point?
Ans: Choke Point is an initiative by US government agencies such as the Federal Reserve and FDIC to scrutinize and close bank accounts of companies deemed to be high risk.
3. Will the cryptocurrency industry continue to face regulatory pressure?
Ans: As laws and regulations are being formulated, individuals, corporations, and start-ups associated with cryptocurrency should brace themselves for more scrutiny by regulators.