The collapse of three major crypto-friendly banks in the United States has left the market wide open for a new bank to step in and “pick up the slack,” while crypto firms could start looking beyond the U.S. for their banking services, according to crypto executives.
Speaking to AIBC, David Lavecky, CEO and co-founder of Web3-focused fintech firm CANVAS, said that banking options for crypto firms are now “very limited” given the recent collapse of Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank.
Lavecky emphasized that the majority of traditional banks don’t want to “touch crypto” as they don’t “want to touch a company” like the now-defunct cryptocurrency exchange FTX.
This is potentially troublesome, as traditional bank accounts are still “really important and necessary to run a business,” whether one is involved in crypto or not.
This could mean crypto firms may need to turn offshore to less regulated or uncertain banking institutions, he said. It could even result in the shift towards the use of stablecoins.
New crypto bank wanted
However, Lavecky sees this as an “opportunity” for a bank to come in and “pick up the slack” and provide services to “good crypto” and blockchain companies.
Fred Schebesta, founder of Global Fintech Finder told AIBC he believes that crypto firms may start exploring outside of the U.S., noting that “the U.S. is one market in the wider crypto space,” and there’s a “much wider global market” and “more opportunities” for crypto firms to build relationships with other institutions.
Schebesta added that certain major banks are still backing major crypto firms, such as Coinbase and Gemini, where users can continue to deposit their funds into these platforms, however, suggested that individuals in the U.S. may want to explore alternative currencies to USD.
“It may mean that a lot of U.S. people might want to consider putting capital into different currencies other than U.S. dollars as they might be concerned about the stability of their local exchanges.”
Schebesta believes that the collapse of these three banks may “spur on investment” for new opportunities because “clearly the banking system is failing.”
Last week, global investment bank Credit Suisse started to signal trouble ahead amid a global banking sector crisis. On March 19, competitor bank UBS Group announced it would be acquiring the bank under “emergency” measures to shore up stability in the financial markets.
New ways of funding
Lavecky stated that recent bank collapses will lead to changes in the way crypto firms approach business models in the future, especially new firms.
He noted that it was “already a challenging environment” for crypto firms to obtain funding, and these recent events have only exacerbated this.
He suggested that in order to thrive in this climate, crypto firms will need to prioritize generating “revenue” and long-term sustainability, while also ensuring operating a “good sound business” that turns a profit.
“New firms will need to focus from day one, on what their product is, how it solves a problem in a big market, how it generates revenue and eventually turns a profit.”
Lavecky emphasized obtaining funding in previous years was much simpler as “there was ‘fomo in the market’ (fear of missing out)” but stated that “those times have passed.”
Who’s to blame?
Regarding Silicon Valley Bank’s collapse, although the mainstream media has blamed crypto for its collapse, Lavecky disagrees. He believes that it was a more widespread issue, and crypto was not solely responsible.
He added that the “vast majority of deposits were uninsured,” and crypto is “very small” compared to the tech industry as a whole.
However, he was “very pleased” to see the steps taken by the Federal Reserve, to calm the situation and back “the losses,” which prevented the collapse of many innovative companies, which can confidently continue to “go and build the next big thing.”
Fed rescue plan
A March 13 statement issued by the Federal Deposit Insurance Corporation (FDIC) stated that all deposits, both insured and uninsured, of the former SVB and Signature Bank, would be transferred to a “newly created, full-service FDIC-operated bridge bank.”
Indeed, depositors reported having “full access to their money” starting the morning of March 13 when the “bridge bank” opened.
Meanwhile, market commentators have expressed their pessimistic views about the future of banking institutions on Twitter in recent times.
Ryan Selkis, the founder of cryptocurrency market intelligence provider Messari, stated a “rough prediction” in a March 17 tweet that more bank failures will happen “in the next couple of weeks.”
Robert Kiyosaki, the best-selling author of “Rich Dad Poor Dad,” stated in a March 16 tweet that the “crash and crisis” is just starting after the collapse of three major banks, advising his followers to buy more Gold, Silver, and Bitcoin.