Getting Frank About Crypto

by Ruth Rachel Anderson-Avraham


Anyone who has ever met Barney Frank, a former Member of the United States House of Representatives (D-MA) and Chairman of the House Financial Services Committee, knows that his name becomes him.

This is a man who speaks his mind, with a keen intelligence and an extremely sharp wit, humorously dubbed as “saber tooth” by former President George W. Bush.

Having managed to salvage his political career following his own public scandal and personal struggles, going on to become one of the most notable and well-loved contemporary Members of Congress, he is a survivor.

Frank is also a man who seeks stability. In 2010, responding to the 2008 financial crisis, he co-authored, with Senator Chris Dodd (D-CT), the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173), more commonly known as “Dodd-Frank”, US legislation increasing the accountability and transparency of financial institutions and other market actors, as well as protections for financial consumers.

Truly “shocking”, then, that Signature Bank, for which Barney Frank served as a Member of the Board since 2015, after retiring from Capitol Hill, should “fail”.  In a twist of fate, the very mechanism by which the Federal Deposit Insurance Corporation (FDIC) seized a Signature Bank which it deemed to be insolvent, allegedly set aside its USD 4 billion in digital asset deposits (the two main points of contention here), and sold off its cash deposits to Flagstar Bank, N.A., a subsidiary of New York Community Bancorp, Inc., was established under Dodd-Frank.

Barney Frank did not let Signature Bank “go gentle into that good night”.

The day following the shuttering of Signature on Sunday, 12 March 2023, in a series of telephone interviews with the likes of CNBC and Bloomberg Radio, Frank, quite frankly, sought to set the record straight:  Signature was solvent on the date of closure, and would have survived the failure of Silicon Valley Bank (SVB) on Friday, 10 March 2023, had it been allowed to open that Monday;  Signature was closed by financial regulators in order to send an “anti-crypto” message to market; and, finally, existing US financial legislation, namely as crafted in part by Frank’s own hands, has not yet created a solid regulatory framework for cryptocurrency.

New York Governor Kathy Hochul and New York State Department of Financial Services (NYSDFS) Superintendent Adrienne Harris maintained that the closure of Signature Bank had nothing to do with cryptocurrency, looking rather to the threat of destabilization posed by the run on deposits suffered by the bank, triggered by the closure of SVB.

Barney Frank confirms that Signature suffered a sudden run on deposits that Friday, in the amount of approximately USD 10 billion.  He also contends that the situation had stabilized, and that the threat to liquidity was no longer present, when Signature Bank was forced to close its doors the following Sunday.  There is no denying that, while both “crypto-friendly”, SVB and Signature were very different banks in terms of how they treated their digital assets banking business.

If Signature Bank was, in fact, solvent on the date of closure, we should be concerned.  Regulation which is based on anything other than economic fundamentals is little more than politically-motivated maneuvering, also threatening to global financial stability, at a cost of USD 2.5 billion in the case of Signature.

After Reuters later reported on Wednesday, 15 March — the “Ides of March”, a dreaded deadline for the payment of debts outstanding, as well as a day of religious significance, in ancient Rome — that the FDIC was quietly requiring prospective buyers of the newly formed Signature Bridge Bank, N.A. “to give up all the crypto business”, it was duly noted by the Editorial Board of the Wall Street Journal on 20 March, following the announcement of the purchase by Flagstar, that “Barney Frank was right”.

As American companies holding deposits in digital assets frantically seek refuge in the Caribbean, Europe, or the Middle East, Martin Gruenberg, FDIC Chairman, publicly maintains that his agency is not seeking to discourage banks from participating in any particular activity (in other words, that this all has nothing to do with crypto).

There is no doubt that existing US legislation, and particularly Dodd-Frank, has yet to sufficiently treat cryptocurrency and its impact upon financial markets.

Both the financial lawyer and the artist in me wholeheartedly believe that an investment in a tangible asset which holds an intrinsic value — such as a bag of flour, a bar of gold, or a work of art — will forever be more sound than any investment in Bitcoin or its cryptocurrency counterparts;  I am a bit of a “crypto-skeptic”.  That being said, even I have been “paid in crypto” at least once in my life.  The growing need of a solid regulatory framework for cryptocurrency is evident.

Getting frank about crypto, “saber tooth” is right, once again.

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Ruth Rachel Yvonne Anderson-Avraham (née Yvonne Michele Anderson) is a JD graduate of Harvard Law School and an MBA graduate of HEC-Paris.  She is Co-Producer of Let’s Get Frank (2003), a documentary film following former United States Representative Barney Frank (D-MA) through the Clinton Impeachment Hearings.