FDIC blamed for undermining crypto

Tom Emmer, the majority whip of the United States House of Representatives, has restated his fears that the federal government is “weaponizing” banking sector issues to target cryptocurrencies.

In a letter dated March 15, Emmer asked Federal Deposit Insurance Corporation chief Martin Gruenberg to clarify if the government agency had advised banks not to give services to crypto businesses or warned that doing so may be “onerous.”

The Minnesota Congressman referenced statements made by former U.S. Representative and Signature Bank board member Barney Frank, who purportedly referred to the FDIC’s action against Signature as a “strong anti-crypto message” rather than a concern for the bank’s viability.

Emmer said, “These attempts to weaponize the recent volatility in the banking sector, precipitated by disastrous government spending and exorbitant interest rate rises, are profoundly irresponsible and might lead to wider financial instability.”

Emmer also accused the Biden administration of wanting to “choke off” digital assets from the U.S. banking system.

Before the failure of Silicon Valley Bank and Signature Bank, the Minnesota Congressman made similar assertions and speculated that the U.S. government might “simply weaponize” a central bank’s digital money as a surveillance tool.

For many in the sector, the latest financial crisis started on March 8, when Silvergate’s parent firm announced that the crypto bank would “wind down operations.”

The Silicon Valley Bank failed on March 10 as a result of a run on deposits. USD Coin issuer Circle disclosed $3.3 billion in bank reserves, resulting in a temporary decoupling of the stablecoin from the dollar.

Barney Frank said at the time that “there was no bankruptcy based on the fundamentals.”

Several law makers and industry experts have speculated that the liquidation of Signature Bank was a deliberate action by government authorities against cryptocurrencies.

The New York State Department of Financial Services allegedly said on March 14 that the bank’s closure had “nothing to do with cryptocurrencies,” noting the institution’s inability to deliver “reliable and consistent data” to the regulator.