Barney Frank Analyzes Causes of Banking Instability By CoinEdition

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Barney Frank Analyzes Causes of Banking Instability
  • Barney Frank suggested that regulators had not taken cryptocurrency into account in 2008.
  • The former Congressman’s remarks were a response to the recent banking system failures.
  • Frank added that the financial system of 2023 is safer than that of 2008.

The American politician and former United States Representative Barney Frank discussed on Sunday, during an interview, that cryptocurrency was not taken into consideration by regulators in 2008, when the first cryptocurrency was created.

Specifically, Frank said that cryptocurrency is a “potentially destabilizing” factor, elaborating:

Digital currency was the new element entered into our system. A new and destabilizing – potentially destabilizing – element is introduced into the financial system. What we get are three failures.

Known for the Dodd-Farnk Wall Street Reform and Consumer Protection Act, better known as Dodd-Frank Act, which was designed to reduce the excessive risks related to the financial sector preventing the global financial crisis.

His current statement was triggered by the recent shocking collapse of the three commercial banking giants. On March 10, Adrienne A. Harris, the superintendent of the New York Department of Financial Services (NYDFS) announced that the New-York based Signature Bank (NASDAQ:) has been taken over by the department.

It is noteworthy that the closure of the Signature Bank was subsequent to the failure of its crypto-friendly partner, Silvergate Capital (NYSE:), and the seizure of the banking company Silicon Valley Bank (SVB).

Frank went on to say that things have now changed; the financial system of 2023 is less vulnerable than that of 2008. Moreover, he argued that while the crypto sector has a major impact on the banking industry, they aren’t mutually destructible, adding:

The negative consequences of that have been unfortunate for some people, but are not systemically problematic.

Frank, being a board member at Signature Bank, reiterated that the clients of the financial institution might have overestimated the bank’s exposure to crypto.

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