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for risk and loan management, explained how the forces of lawyers, investigators and fraud experts is in keeping
leading to recent crypto network and bank failures, "were with recommendations put forth in "The Administration's
less about crypto and more about interest rates." Roadmap to Mitigate Cryptocurrencies' Risks," published
The former banker continued, "What we're seeing is that Jan. 27, 2023, on www.whitehouse.gov.
when money is cheap and plentiful, people are more in-
clined to invest in speculative assets like crypto." "But the events of the past year underscore that more is
needed," the White House stated in that document, adding
As the Federal Reserve raised interest rates beginning in that more needs to be done to thwart crypto fraud and ef-
March 2022, the yields on government debt rose, which forts to use crypto for money laundering. The FBI report-
caused the market value of previously issued debt (Trea- ed that Americans were taken for $2.57 billion in online
sury bills and corporate bonds) to plunge, several econo- crypto scams last year. The crypto exchange FTX stated in
mists have explained. For example, a 2 percentage point March 2023 that it had identified $8.9 billion in customer
gain in the yield on a 30-year bond can cause its market funds that have gone missing.
value to plunge by as much as 32 percent.
The Administration also pushed for congressional action.
That problem was exacerbated when executives at tech- It offered a laundry list of legislative steps Congress could
nology companies began withdrawing their cash in re- take—steps to increase transparency and disclosure,
sponse to layoffs. The withdrawals couldn't be met by ex- stepped up enforcement and addressing stablecoin risks.
isting cash reserves, so, for example, SVB was forced to sell
a large portion of its securities portfolio at a loss of about In an October 2022 paper, the FSOC warned that some
$1.8 billion, the news of which prompted a customer run backers of stablecoins are playing fast and loose with the
on the bank. truth, for example, by suggesting the assets are backed by
FDIC insurance when they are not. Chopra addressed the
Aliotta stated that regulators should have been more stablecoin issue with Yahoo Finance. "Right now stable-
closely monitoring banks for interest rate risk. "This was coins are not ready for consumer payments," he said, not-
a very selfish risk created by one or two banks," he said. ing that crypto lacks the scale of options like credit and
debit cards.
Paul Kupiec, senior fellow at the American Enterprise In-
stitute, offered a similar assessment in an opinion piece "It's kind of a fool's errand to bring crypto to the point of
published by The Hill. "Both [SVB] and Signature Bank sale," Sondhi said.
grew like crazy in the past few years. According to an
FDIC discussion of its early warning models, the first sign Patti Murphy is senior editor at The Green Sheet and self-described
of a problem bank is often rapid growth funded by a vola- payments maven of the fourth estate. She also co-hosts the Merchant
tile lending source, like uninsured deposits. Other signs
include a concentration in bank business or loan categories Sales Podcast.
and growth fueled by a new activity," Kupiec wrote, add-
ing that the description "of a potentially troublesome bank Call me today!
fit both SVB and Signature Bank to a 't' and yet none of
the regulators seemed to pay any attention to either bank." Let me help you
with your
To add irony to the situation, SVB's CEO was a director of
the San Francisco Fed, and former Congressman Barney advertising
Frank, co-author of the Dodd-Frank Act, was a director of
Signature Bank. "Apparently, knowledge of basic banking success.
skills was not the talent that landed either of them in the
boardroom," Kupiec quipped. 707-284-1693
SEC asserts regulatory authority

One regulatory agency that has been focusing on the
crypto market is the Security and Exchange Commission.
It has filed charges against about a dozen celebrities for
touting crypto assets in violation of securities laws. "Noth-
ing about the crypto markets is incompatible with securi-
ties laws," SEC Chairman Gary Gensler said in a Septem-
ber 2022 speech. "Investor protection is just as relevant,
regardless of underlying technologies." R R
Last year, the SEC nearly doubled the number of experts ick Aston
Senior Media Partnership Specialist
assigned to its crypto assets and cyber unit. The infusion Rick@greensheet.com

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