Why Does CZ Think Buying A Bank Would Not Solve The Problem?
Regulatory crackdown makes it hard to operate crypto businesses. Banking services facilitate the on-ramp and off-ramp of crypto. Otherwise, it would be difficult and big investors will be reluctant to invest in crypto.
Silvergate, Silicon Valley Bank, and Signature Bank support crypto businesses in the US. But after the collapse of these banks, it becomes challenging to get banking services. Whatever regulators point out the reasons behind collapsing of these banks, their intention is an open secret.
The leading crypto exchange Binance is not able to continue Australian dollar services since its third-party payment service provider will not support it anymore. Regulatory scrutiny is visible everywhere.
So will it be a good idea if Binance buys a bank and makes it crypto-friendly to support the crypto businesses? Looks like it will solve the ongoing problems and support crypto businesses to grow faster. On the Bankless Podcast, this question was asked to Binance CEO Changpeng Zhao, CZ.
CZ does not think it would solve the problems as it seems. If Binance buys a bank, the bank has to follow banking regulations in that country. Again it has to deal with banking regulators, especially in the US to make international transactions. If regulators decide not to let the bank get involved in crypto. the bank cannot touch crypto.
In case the banking regulators cease the license, the bank cannot operate its business, let alone support the crypto businesses. According to Binance's CEO, buying a bank is expensive. A huge amount of capital is needed to buy a bank or set up a new bank that generates little business revenue.
But I do think banks are profitable despite the cost. Otherwise, they could not operate their business. Most people in our society rely on banks. It can change in the future with more adoption of cryptocurrency.
The fractional reserve system gives banks some sort of superpower and they use it to their advantage. Still, it is risky to operate a bank. If the government is not there to save the banks, it might end up pretty bad. And CZ does not like to run this business.
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