Crypto-friendly banks' collapse, do we need the bank in the first place?
The crypto industry has been rocked by the recent news of Signature bank, SVB, and Silvergate bank all collapsing due to their involvement in cryptocurrency-related activities. These banks were some of the most prominent players in the space, providing services such as custody solutions for digital assets and facilitating transactions between exchanges.
The news of their bankruptcy has left many in the industry wondering what this means for the future of crypto-friendly banking. This is because these banks were some of the few that had embraced cryptocurrency and provided services for those who were involved in it.
The collapse of these banks has raised questions about the involvement of banks in crypto. After all, cryptocurrencies are designed to be decentralized and independent from traditional financial institutions. So do we need banks in the first place?
The answer is not so simple. On one hand, banks provide a level of security and trust that many crypto investors are looking for. Banks also offer services such as custody solutions and fiat to crypto conversation and back in most countries which can be difficult to find elsewhere. On the other hand, banks come with their own set of risks and regulations that many crypto users are trying to avoid.
The recent scandal has highlighted the need for complete decentralization in crypto-related businesses and services. The idea of a crypto-friendly bank is appealing, but it's clear that the current banking system isn't ready to provide such services without significant risk. The good news is that there are alternatives to banks. Decentralized finance (Defi) protocols have been gaining traction in recent years and offer a wide range of services such as lending, borrowing, trading, and more. These protocols are built on blockchain technology which makes them secure and trustless.
The crypto industry is still in its infancy and many challenges need to be addressed before it can become mainstream. the future of finance lies in decentralization and trustlessness. The recent banks' collapse has highlighted the importance of decentralization and trustlessness in the crypto space, but they also show that banks may not be necessary for crypto users. Defi protocols are becoming increasingly popular and offer a wide range of services that can replace banking. Banks may still be useful for certain services, but the crypto industry is quickly moving away from them and towards more decentralized solutions.
I keep wondering how people will have trust in a digital currency or a stablecoin that's been controlled by a bank. Banks have been known to be unreliable and untrustworthy, so why would anyone trust them with their money? The USDC de-pegging shouldn't be a shocker to anyone. Any digital currency that has an affiliation with a bank will mostly take the same route. This is a clear warning to crypto users about the proposed central bank digital currency CBDC. You can imagine how colossal it would be if something of this nature should happen with billions of people across the world having their money in CBDC.
Tether USDT has been under watch for a very long time now, the reason being the institutional operation around it. It's clear that the crypto industry needs to move away from anything related to banks and towards more decentralized solutions. Only decentralization can truly safeguard the future of cryptocurrency.
The article is the opinion of the author and does not reflect the position of any known entity, and it's not financial advice for anyone.