Senators question U.S. banking regulators on crypto exposure


Two U.S senators have written to agencies tasked with supervising the financial sector to seek details about banks’ exposure to cryptocurrencies.

Sens. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., also want answers on how Sam Bankman-Fried’s Alameda Research was reportedly able to buy Washington state-based Moonstone Bank. 

”While the banking system has so far been relatively unscathed by the latest crypto crash, FTX’s collapse shows that crypto may be more integrated into the banking system than regulators are aware,” the letters said. 

The nearly identical letters, dated Dec. 7., were sent to Federal Reserve Chairman Jerome Powell, Federal Deposit Insurance Corporation Acting Chair Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu. 

The letters ask the agency heads nine questions including about plans to review crypto firms’ relationships with banks. The senators also want a detailed list of banks that provide cryptocurrency custody services, hold dollar deposits for crypto firms, provide loans and facilitate stablecoin transactions for crypto firms. 

The two senators, who sit on the Senate Banking Committee that recently scheduled a hearing on FTX, also want information on how Alameda was able to acquire Moonstone Bank and whether that transaction was reviewed by the Federal Reserve. Alameda invested $11.5 million into Moonstone, more than double the bank’s worth at the time, the senators wrote, citing a New York Times report on the transaction. 

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Silvergate Capital, Provident Bancorp, Metropolitan Commercial Bank, Signature Bank and Customers Bancorp were named as other banks with crypto ties. Warren earlier this week joined a bipartisan group of senators to write to Silvergate Chief Executive Officer Alan Lane asking for more information on the bank’s link to FTX and Alameda. 

FTX, once the world’s second-largest crypto exchange, collapsed last month and filed bankruptcy along with Alameda and approximately 130 fellow corporate entities.

The U.S. Justice Department and multiple regulators are among authorities around the world now investigating the collapse of the multibillion-dollar crypto empire, including alleged mishandling of and theft of customer assets.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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