What’s next for crypto after the financial crisis?
In March 2023, Silicon Valley Bank (SVB) collapsed in what appears to be a financial crisis similar to the one of 2008. This event caused the depegging of several major stablecoins in the crypto industry, which led to many people wondering if the system itself is inherently flawed.
The value of the stablecoin USDC, which is the second-largest stablecoin by market capitalization, saw a significant decrease by dropping to 0.87 USD, due to the fact that 3.3 billion of its 40 billion USD reserves were stored in SVB at the time of the collapse.
The United States government took matters into their own hands and ensured depositors at SVB would be made whole, in order to ensure that other entities did not suffer irreparable damage. This led to many stablecoins restoring their peg value.
Ever since the collapse of SVB, other financial institutions have come together to protect other banks, leaving investors and depositors who are concerned about the stability of those institutions. For instance, Credit Suisse, a Swiss bank, collapsed after a rumor started going around regarding the imminent failure of the bank, which scared customers into withdrawing over 110 billion Swiss francs.
Credit Suisse was then acquired by its rival UBS, another Swiss bank, for a discounted price in what it is known as an “emergency rescue” deal to stop Credit Suisse from going under.
However, Becky Sarwate, the head of communications at CEX.io, believes that the financial crisis could be beneficial for digital assets. “One thing is clear: Similar to how bitcoin blossomed from the wreckage of the 2008 financial crisis, the failure of institutions like SVB and Signature Bank is compelling evidence for diversification across multiple investment verticals,” she told Cointelegraph.
Sarwate commented that when “traditional pathways prove equally volatile from the perspective of a crypto curious participant, it throws the inherent risk of any market participation into relief.” She believes that even though digital assets do lack protection and security in comparison with traditional finance, they could offer certain benefits for some investors.
The Federal Deposit and Insurance Corporation (FDIC) could help eliminate some risks for stablecoins by providing insurance to crypto institutions. The insurance that brought USDC back to life by making every depositor whole after the SVB collapse, for example, could play a wider role in helping to increase mass crypto adoption.
Danny Talwar, Head of Tax at Koinly, believes that having multiple stablecoin options, such as the euro-backed stablecoins, could be a better way to mitigate the risks, while Becky Sarwate assures that the U.S banking crisis has already helped.
While U.S regulators continue to speak out against crypto, the industry is actively looking for better ways to position itself more securely in the financial world and continue to find solutions to the issues with traditional financial systems.
Source: cointelegraph.com
analyst opinion
Diego Kebork
In March 2023, Silicon Valley Bank (SVB) collapsed in what appears to be a financial crisis similar to the one of 2008. This event caused the depegging of several major stablecoins in the crypto industry, which led to many people wondering if the system itself is inherently flawed.
The value of the stablecoin USDC, which is the second-largest stablecoin by market capitalization, saw a significant decrease by dropping to 0.87 USD, due to the fact that 3.3 billion of its 40 billion USD reserves were stored in SVB at the time of the collapse.
The United States government took matters into their own hands and ensured depositors at SVB would be made whole, in order to ensure that other entities did not suffer irreparable damage. This led to many stablecoins restoring their peg value.
Ever since the collapse of SVB, other financial institutions have come together to protect other banks, leaving investors and depositors who are concerned about the stability of those institutions. For instance, Credit Suisse, a Swiss bank, collapsed after a rumor started going around regarding the imminent failure of the bank, which scared customers into withdrawing over 110 billion Swiss francs.
Credit Suisse was then acquired by its rival UBS, another Swiss bank, for a discounted price in what it is known as an “emergency rescue” deal to stop Credit Suisse from going under.
However, Becky Sarwate, the head of communications at CEX.io, believes that the financial crisis could be beneficial for digital assets. “One thing is clear: Similar to how bitcoin blossomed from the wreckage of the 2008 financial crisis, the failure of institutions like SVB and Signature Bank is compelling evidence for diversification across multiple investment verticals,” she told Cointelegraph.
Sarwate commented that when “traditional pathways prove equally volatile from the perspective of a crypto curious participant, it throws the inherent risk of any market participation into relief.” She believes that even though digital assets do lack protection and security in comparison with traditional finance, they could offer certain benefits for some investors.
The Federal Deposit and Insurance Corporation (FDIC) could help eliminate some risks for stablecoins by providing insurance to crypto institutions. The insurance that brought USDC back to life by making every depositor whole after the SVB collapse, for example, could play a wider role in helping to increase mass crypto adoption.
Danny Talwar, Head of Tax at Koinly, believes that having multiple stablecoin options, such as the euro-backed stablecoins, could be a better way to mitigate the risks, while Becky Sarwate assures that the U.S banking crisis has already helped.
While U.S regulators continue to speak out against crypto, the industry is actively looking for better ways to position itself more securely in the financial world and continue to find solutions to the issues with traditional financial systems.
Source: cointelegraph.com
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