US lawmaker accuses FDIC of using banking instability to attack crypto

The collapse of Signature Bank, Silicon Valley Bank, and Silvergate Bank has had many in the space reeling — but is the U.S. government trying to “choke off digital assets”?

Tom Emmer, Majority Whip of the United States House of Representatives, has reiterated concerns that the federal government is “weaponizing” concerns around the banking industry to go after crypto.

In a March 15 letter, Emmer called on Federal Deposit Insurance Corporation chair Martin Gruenberg to answer questions as to whether the government corporation has specifically instructed banks not to provide services to crypto firms, or suggested doing so may be an “onerous” task. The Minnesota Representative cited claims from Signature Bank board member and former U.S. Representative Barney Frank, who reportedly called the FDIC moving against Signature as a “strong anti-crypto message” rather than based on concerns about the bank’s solvency.

“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability,” said Emmer.

Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. pic.twitter.com/fDmaA0XGWv

— Tom Emmer (@GOPMajorityWhip) March 15, 2023

Emmer also targeted the Biden administration, accusing policymakers of attempting to “choke off digital assets” from the U.S. financial system. The Minnesota Representative has made similar claims prior to the collapse of Silicon Valley Bank and Signature Bank, in addition to speculating the U.S. government could “easily weaponize” a central bank digital currency as a surveillance tool.

Related: Signature Bank and former executives sued by shareholders for alleged fraud

For many in the space, the recent banking crisis began with Silvergate’s parent company announcing on March 8 it would “wind down operations” for the crypto bank. Silicon Valley Bank followed on March 10 with its own failure after a run on deposits. USD Coin (USDC) issuer Circle reported $3.3 billion of its reserves in the bank, causing the stablecoin to temporarily depeg from the dollar.

Some lawmakers and those in the space have suggested the shutdown of Signature Bank could have been a targeted move by government officials against crypto, as Barney Frank reported were “there was no insolvency based on the fundamentals” at the time. The New York State Department of Financial Services reportedly said on March 14 that its closing the bank had “nothing to do with crypto”, citing the firm’s failure to provide “reliable and consistent data” to the regulator.