Banking Meltdown Ignites Crypto Revolution: Time to Seize the Power and Be Your Own Bank!

Crypto Near Miss: Banks Collapse, USD Coin Depegs, and Investors Receive Warning Shot - An eye-opening reminder that crypto investors must take steps to decentralise their investments and be their own bank.


Credits: Openai DALL-E Image Generation. Prompt: 'Create a vivid and eye-catching illustration visualizing the collision of traditional banking and cryptocurrency worlds, highlighting the chaos of the recent banking collapse alongside the rising call for decentralization and financial freedom in the crypto community'
Credits: Openai DALL-E Image Generation. Prompt: 'Create a vivid and eye-catching illustration visualizing the collision of traditional banking and cryptocurrency worlds, highlighting the chaos of the recent banking collapse alongside the rising call for decentralization and financial freedom in the crypto community'
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LONDON (Bywire News) - The crypto industry experienced a near miss this week that shook the global financial world, according to Yves La Rose, the EOS Network Foundation CEO. Silicon Valley Bank (SVB), New York lender Signature Bank, and crypto-friendly bank Silvergate all collapsed, sending shockwaves through the world of investors, regulators, and customers. The recent events have put a spotlight on the counterparty risk inherent in any centralised financial system, and the fragility of the crypto industry's reliance on fiat banks.

The US government stepped in to assure depositors they would be able to recover their capital, but the incident saw top stablecoin USD Coin (USDC) depeg temporarily, dropping as low as 87 cents at one stage. This is alarming considering USDC is the fifth-largest cryptocurrency, owned by Circle, which had $3.3 billion deposited at the now-doomed SVB.

The near miss with USDC's depeg serves as an eye-opening reminder of the counterparty risk associated with centralised financial systems. Stablecoins such as DAI and FRAX use USD Coin as collateral and also lost their pegs as a result of the incident. It is deeply concerning that a fiat bank collapse could cause such an upheaval in a top five digital asset. Additionally, 33% of the cash reserves backing USDC were held at a bank with a $1.8 billion hole in its balance sheet.

Read the lastest EOS crypto news

Crypto investors have received yet another warning shot, following FTX, Three Arrows, Terra and Celsius last year. The mantra “Be your own bank” has been repeated ad nauseam, but this event should drive the message home for any crypto investors who were previously wilfully blind.

The current problems with crypto lie in the points of friction between the traditional financial system and the parallel digital assets exchanges and tokens systems. This incident has highlighted the need for the crypto industry to conform to the regulations of traditional firms and establish partnerships that bridge the two worlds.

Crypto-friendly banks such as Silvergate have provided banking services to a swath of crypto companies and platforms, and have been a positive development in recent years. However, the fragility of their existence was revealed when their customers were almost wiped out in the course of a single week.

The events of this week remind us of why crypto was born in the first place. The bright minds pushing it forward were deeply cynical about the traditional system, and it was broken, they said. Decentralisation was the answer. Bitcoin was introduced to the world right after the 2008 financial crash, and fifteen years later, we’re witnessing anew the failure of reserve banking and a debt-based system.

The crypto industry's near miss is a wake-up call for all and serves as a reminder of the need for greater decentralisation. It is tempting to think that a decentralised stablecoin such as DAI would have been immune to the USDC depeg, but DAI is partly backed by a basket of stables including USDC itself.

We must remain vigilant and accept that we are still very dependent on the traditional financial system and its rails to do business. Crypto investors must take it upon themselves to take the necessary steps to be their own bank and decentralise their investments.

(Edited by Michael O'Sullivan)

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