By The Daily Hodl - 1 year ago - Reading Time: 2 minutes
Coinbase Says US Banking Crisis Reinforcing Crypto Assets to the Upside, Catching Attention of Institutions
A top Coinbase researcher thinks the recent US banking crisis reinforces the value of blockchain and cryptocurrency technology.
David Duong, the head of institutional research at Coinbase, argues in a recent analysis that crypto has “exhibited resilience” as some traditional banks faltered.
“Overall, we believe the medium to long-term outlook for cryptocurrencies has been reinforced to the upside. The technology behind open trustless blockchains and transparent smart contracts stands in stark contrast to the poor risk management practices that led to the turmoil witnessed in the US banking sector this week. That supports the fundamental arguments in favor of digital assets as an alternative and solution to the points of failure witnessed in the existing financial system.”
Duong acknowledges that crypto businesses could be in for difficulties in the short term “due to the loss of some fiat payment rails.”
Silicon Valley Bank (SVB) suffered a bank run and collapsed earlier this month after it revealed $1.8 billion in losses, largely due to selling US bonds that lost much of their value due to the Fed’s aggressive rate hikes.
The fallout spread from SVB to New York-based institution Signature Bank, which the New York State Department of Financial Services closed down after its customers withdrew $10 billion worth of deposits in a single day.
The state regulator then appointed the FDIC to run a “bridge bank” holding all of Signature’s assets until the financial institution could be sold off.
This weekend, the FDIC sold Signature, a crypto-friendly institution, to Flagstar Bank, a subsidiary of New York Community Bancorp. The deal was worth $38.4 billion, and includes “substantially all deposits and certain loan portfolios” of the failed bank, according to an FDIC press release.
The terms of the deal, however, do not include Signature’s approximately $4 billion of deposits related to its digital-assets banking business. The FDIC says it will provide the deposits directly to those customers.
Reuters reported last week that the regulator required any banks interested in acquiring Signature to agree to give up all of the company’s businesses that were related to crypto.
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Original source: The Daily Hodl