The closures of Silvergate Bank, Silicon Valley Bank and Signature Bank caused a shock in crypto land last week. Although the news seemed anything but favorable in the short term, it is now leading investors to crypto and all prices are rising sharply. In the long term, it could be beneficial for the crypto sector.
Bad advertising for crypto?
In the short term, the closure of these “crypto banks” could put the spotlight on the negativity of crypto. The banks were generally known as institutions that invested a lot of money in the crypto sector. At first glance, the collapse of the banks is therefore not a good advertisement for crypto.
“In the short term it will [de sluiting van de crypto banken] increase the strict supervision of crypto and banks linked to crypto. It will scrutinize crypto when analyzing systematic risk.”
According to the CEO from Router Protocol to Coindesk. Although this is an expected consequence, it is not entirely justified according to some. According to Circle, the company behind USDC, the fall of the banks is not the fault of crypto. The fault lies with traditional finance, or TradFi, itself.
“What happened in the last few days is kind of an ironic ‘black swan’ event. Where normally the contamination takes place from crypto to TradFi, it was now the other way around.”
The long-term consequences
According to Jonathan Zeppettini, the closure of the three banks is an attempt by regulators to crack down on “crypto-friendly” banks. “The attempt to constrain liquidity” was a way to strangle weaker unregulated players and slow down adoption.
Although this can certainly have this effect in the short term, it is good news in the long term, according to Zeppettini.
“It could have the opposite effect if exchanges and other players move to other countries and jurisdictions that are more crypto-friendly. This will lead to a more robust infrastructure and less hostility.”