So, to start with, three banks collapsed in less than a week. All three have significant connections with the crypto sector. Crypto was a favorite client base of two of them: Silvergate and Signature. The crisis in Silicon Valley Bank (SVB), the biggest of the three, has made the biggest waves. At one point, it was the country’s 20th-largest bank. It failed on March 10, 2023, with its holdings now managed by the Federal Deposit Insurance Corporation .
All of this happened between Thursday and Monday. If you weren’t looking at crypto Twitter—and you’re not much of a news junkie—you might have missed it. Lucky you.
Markets returned to a state of relative calm on Monday. But that doesn’t mean the crisis is over. Questions still hang over the future of the industry and its relationship to TradFi.
We could be looking at significant consequences due to the de-banking of the sector, says Danny Talwar, the Head of Tax at Koinly . “Crypto startups and exchanges will now be searching for alternative banking providers in the wake of these collapses. The debanking of crypto businesses could seriously harm the sector and innovation in blockchain-based technologies.”
He continued,
“The setbacks following the collapse and closure of multiple crypto-friendly banks such as Silvergate, SVB, and Signature Bank may even set the industry back a decade. In the medium term, this will compound with the more crypto-native collapses from the past year, resulting in an extremely difficult environment for innovation to thrive within the USA.”
Bankageddon Will Have Longer-Term Consequences
According to Brian Fu, the co-Founder and co-Project Lead of zkLend , the fallout will be different depending on your size and business. “For the larger firms such as exchanges, the impact would be delayed settlement times and difficulty in on-off ramping. While for smaller firms, they may simply not be able to open a bank account to run daily operations.”
another existential crisis in crypto banking? pic.twitter.com/wtAI4lFEIV — barkery