Retail banking (banking for individuals and small businesses) is extremely strong.
You don’t have to read difficult reports or gory anecdotes to understand that. Just imagine all your bank accounts frozen.
Credit cards will no longer work. how are you going to live?
Hopefully you’re hiding money under your bed. May you live near a place that has Bitcoin (BTC) or promotes the Bitcoin economy. Living in Argentina and having fiat currency unreliable since the 1980s, maybe a dollar-backed stablecoin like Tether (USDT) will work.
Otherwise, the situation is dire.
The simple solution is a call to action. We need more crypto economy.
Build communities, counties, states and countries completely disconnected from the existing banking system, like Bitcoin Beach in El Salvador.
But even as the crypto economy continues to emerge, banks and crypto assets are closely linked.
Before Silver Gate, After Silver Gate
Silvergate has been the bank for many crypto companies that tend to struggle to maintain business relationships with banks.
The opening of Silvergate to cryptocurrency companies has become a very big point for cryptocurrency companies, especially cryptocurrency exchanges. FTX founder Sam Bankman-Fried said, “The history of cryptocurrency companies can be divided into pre-Silvergate and post-Silvergate.”
Related article: Before Silvergate, After Silvergate—What impact will bankruptcy concerns have on the industry?
The reason why Silvergate is so favored by cryptocurrency exchanges is, above all, that it provides access to banking services. This is because instant payments during the period were possible 24 hours a day, 365 days a year, including weekends and nights.
It’s similar to how Venmo and CashApp can be used to exchange bills for late-night ramen or pizza with friends.
government-facilitated bank run
FTX went bankrupt, Silvergate customers worried, and billions of dollars in deposits withdrawn. Silvergate took a loan from the Federal Home Loan Bank to keep the business going, but was eventually forced into voluntary liquidation.
Things have obviously been tough for Silvergate (and other crypto-friendly banks), but US Senator Elizabeth Warren sent a letter criticizing Silvergate and the White House blogged about its concerns about crypto. With the release, it became even more difficult.
Regulators and politicians have not said that crypto exchanges and other crypto companies should not receive banking services. However, it has certainly brought uncertainty to the future of the industry.
What’s interesting about Silvergate is that the bank never used Bitcoin or other cryptocurrencies as collateral to lend. The old-fashioned bank run got us into trouble. The bank run was facilitated by the government.
Need a bank to bypass the banking system?
The Silvergate issue has made it clear that the crypto industry has a problem with banking. Critics of cryptoassets will say, “Cryptoassets were created to circumvent the banking system.
strange? That may be true. But it’s no laughing matter.
First, we believe that banks and cryptoassets can coexist, and will and should do so in the future. Just because Bitcoin and other cryptocurrencies offer bank-free options doesn’t mean that everyone will go bankrupt altogether.
Of course, there will be genuine self-sovereignists who want to exclude third parties altogether. But there are billions of people living in the world. Organizing that many people is much easier with some reliance on a third party.
And the world created by crypto assets such as Bitcoin is a world where third parties are more honest. Better to have more honest banks that keep their customers’ money safe and provide future capital (i.e. credit) to responsible people.
what is happening in america right now
It may sound like a big deal, but it is possible.
It’s a bit confusing, but the need for banks by crypto/crypto companies born to “avoid the banking system” explains why the banking system should be circumvented (or at least somehow dismantled). clearly show.
Just imagine. A country has a vital industry (e.g. banking industry) that is considered undesirable (e.g. cryptocurrency industry) by simply threatening to regulate its service offerings. The kind of industry that is supposed to be brought to its knees.
But you don’t have to imagine. This is what is happening in America right now. The U.S. executive branch (White House) and legislative branch (Congress) have alluded to tightening regulations in the future if banks servicing cryptocurrency companies do not get their act together.
I don’t think it’s good practice, but it can be good policy if you don’t overdo it. If the higher hurdles for cryptocurrency companies to access banks lead to more thorough due diligence practices that will reduce the number of rogue companies in the ecosystem, ultimately retail investors will It will be safer and the system will be less susceptible to things like falling prices.
Maybe it will. For now, I want to be cautiously optimistic.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Original: Crypto’s Banking Problem Is Not Ironic