Some crypto-friendly top banks have crashed due to regulatory uncertainty, market downtrend, and shortage of operational funds. The three banks that sent the digital asset market into a downtrend were Silvergate, Silicon Valley, and Signature bank. These banks serviced top firms such as Paxos, Coinbase, Yuga Labs, Circle, Panterra Capital, and Avalanche.
The sudden crash exposed these crypto firms to risks leading to a bearish trend in the crypto market. Notably, the trend changed when the US Federal Reserve announced support funding to protect depositors of the shuttered bank. This incident has propelled Cardano founder, Charles Hoskinson, to propose that the crypto industry ditch the banks.
Banks Are Volatile And Unstable, Cardano Founder
Charles Hoskinson’s tweet reflected his thoughts on the ongoing crisis in the banking sector. In his message, the Cardano founder stated that the banks are unstable and that the industry should reconsider using them.
While responding to Hoskinson’s tweet, a user named Crypto Dojo agreed to his suggestion, pointing out that the industry needed a decentralized digital asset bank. In response, Hoskinson stated that the banks wouldn’t matter once the industry digitalized treasuries.
Other Twitter users supported Hoskinson’s idea of ditching banks. One Twitter user who goes by KG pointed out that the US Dollar de-pegged from the gold standard to become a standalone medium of exchange. As such, the digital sector needs to de-peg from USD and become a “self-sustaining and perpetuating ecosystem.”
Still, on Hoskinson’s post, another user suggested that Bitcoin should also distance itself from many unstable coins and tokens to align with other positive projects pursuing a better tomorrow.
Implications Of Bank Implosions On The Crypto Sector
The three banks that crashed recently were crypto-friendly institutions. By going out of business, they have exposed many crypto firms to a desperate search for suitable institutions to support their operations. Moreover, it will take time for the industry to reestablish a solid connection with the traditional banking system.
In the past, it was very challenging for some crypto firms to gain the support of banks. Now, the situation is replaying once again. Some crypto companies even suspended USD bank transfers due to the disconnection of banking support.
With the current situation, Hoskinson’s suggestion may not seem farfetched, given that some people blamed the crypto industry for the collapse of these banks. Even though it may not be true, shutting down these banks suggests increased regulatory scrutiny on the financial industry, including crypto. It also shows that the crypto industry is seen as a huge threat to the traditional finance system due to its decentralized nature.
Many supporters of the crypto industry have envisaged a time when it will overtake the traditional finance system. While such a day remains a futuristic reality, the industry has to struggle to reconnect to the banking system to continue running smoothly.
Featured image from Pixabay and chart from Tradingview.com