Coinbase says US banking crisis boosts crypto assets to the upside and captures institutions’ attention
A top Coinbase researcher believes the recent US banking crisis reinforces the value of blockchain and cryptocurrency technology.
David Duong, 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 strengthened 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 in the US banking sector this week. It supports the fundamental arguments in favor of digital assets as an alternative and solution to the failings of the existing financial system.”
Duong acknowledges that crypto businesses may be in trouble 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 the sale of 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 shut down after customers withdrew $10 billion worth of deposits in a single day.
The state regulator then appointed the FDIC to operate a “bridge bank” that held all of Signature’s assets until the financial institution could be sold.
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.
However, the terms of the deal do not include Signature’s approximately $4 billion in deposits related to its digital asset banking business. The FDIC says it will give the deposits directly to those customers.
Reuters reported last week that the regulator required all banks interested in acquiring Signature to agree to divest all of the company’s crypto-related businesses.
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