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What the Signature Bank Failure Means for Crypto, According to Experts

BusinessCryptoWhat the Signature Bank Failure Means for Crypto, According to Experts
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The collapse of the Silicon Valley bank and subsequent measures prompted the FDIC and the Federal Reserve to close crypto-friendly bank Signature Bank due to “similar systemic risks” to avoid further losses on March 12 due to fears of contagion by regulators. Did.

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“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was shut down by its state chartering authority today. All depositors of this institution are entitled to complete Will be done.

it comes as another Blow to the crypto communityThis comes days after the collapse of industry heavyweight and crypto-friendly bank Silvergate, which announced on March 8 that it was ceasing operations and liquidating.

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At the time, many in the industry saw Signature as the last resort for crypto companies capable of forging ties to traditional financial institutions, and believed that the bank would act as the bank for the digital asset industry. Will work in

effect of bank collapse

“Bank failures will have negative consequences in the long run,” said Petr Kozyakov, co-founder and CEO of Global Payments Infrastructure Platform. Mercury, “In addition to a possible decrease in digital asset market capitalization, recent events are likely to undermine trust in crypto-friendly financial institutions, which will further slow down the development of the relationship between Tradefi and crypto players.”

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Kozyakov said another point is that both Silvergate and Signature are leading providers in their fields. Now, digital asset projects have to find new banking partners.

“Their failures create a significant gap that could complicate access to crypto,” Kozykov said. “With SVB holding over $5 billion for large crypto VCs, its collapse could also hurt startup investment.”

For some, this has reignited the debate as to whether crypto banking should be separated from standard banking or whether it should be integrated into the existing financial system.

Attack on crypto?

Some in the industry question the motives of regulators to shut down Signature – one of the latest financial bastions of crypto-friendliness.

According to Dave Weisberger, CEO and co-founder of coinrootsThe circumstances leading up to Signature’s shutdown are very unclear, and it appears that authorities have used the wider crisis facing the banking system as an excuse to bail out one of the few remaining crypto-focused banks in the United States.

“This was done so suddenly — and with relatively little communication as to why — that many in the digital asset industry are concerned that this was done intentionally to deter people from investing in crypto,” Weisberger said.

The sentiment was echoed by many. Ryan Selkis, CEO of crypto research firm Messari, tweeted: “Crypto’s banking rails have been effectively shut down in less than a week.”

Money moving from banks to bitcoin?

Meanwhile, amid this doom and gloom, there is a silver lining as many experts note that another (unintended but welcome) consequence is the fact that this situation underscores the importance of assets.

“I believe we will look back on this event as a pivotal moment in bitcoin history,” Weisberger said.

For the short term, the impact for banking rails in the crypto industry will certainly be negative; But, from a holistic perspective, bitcoin is poised to flourish as people move their funds out of banks and into bitcoin, said Danny Oyekan, founder and CEO of the digital investment firm. Dan Holdings and digital asset exchange blockfinex,

“In fact, the creation of bitcoin was the result of providing a safe haven for these types of financial crises,” Oyekan said. “And so the value proposition for bitcoin is only going to increase because of what is happening. I personally have a lot of friends around the world who are moving their assets into crypto as quickly as possible.

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This article originally appeared on GOBankingRates.com, What the Signature Bank Failure Means for Crypto, According to Experts

The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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