Crypto firms should ditch banks to de-risk volatile systems, says Cardano founder
Something crypto friendly top banks has crashed due to regulatory uncertainty, market downturn and lack of working capital. The three banks that sent the digital asset market into a downward trend were Silvergate, Silicon Valley and Signature bank. These banks served top companies such as Paxos, Coinbase, Yuga Labs, Circle, Panterra capitaland Avalanche.
The sudden crash exposed these crypto firms to risks that led to a bearish trend in the the crypto market. In particular, the trend changed when the US central bank announced subsidies to protect depositors in the closed bank. This incident has prompted Cardano founder Charles Hoskinson to suggest that the crypto industry ditch the banks.
Banks are volatile and unstable, Cardano founder
Charles Hoskinson chirping reflected his thoughts on the ongoing crisis in the banking sector. In his message, the Cardano founder stated that the banks are unstable and that the industry should reconsider using them.
While responding to Hoskinson’s tweet, one user called Crypto Dojo agreed to his proposal, pointing out that the industry needed a decentralized digital asset bank. In response, Hoskinson stated that the banks would not matter once the industry digitized the treasuries.
Other Twitter users supported Hoskinson’s idea to dump banks. A Twitter user passing by KG pointed out that the US dollar was removed from the gold standard to become an independent medium of exchange. As such, the digital sector must decouple from the USD and become a “self-sustaining and perpetuating ecosystem.”
Yet, on Hoskinson’s post, another User suggested that Bitcoin should also distance itself from many unstable coins and tokens to align with other positive projects that strive for a better tomorrow.
Implications of bank implosions on the crypto sector
The three banks that crashed recently were crypto-friendly institutions. By going bankrupt, they have exposed many crypto firms to a desperate one search for suitable institutions to support their operations. Moreover, it will take time for the industry to re-establish a solid connection with the traditional banking system.
In the past, it was very challenging for some crypto firms to get support from banks. Now the situation is repeating itself. Some crypto companies even suspended USD bank transfers due to disconnection of bank support.
Given the current situation, Hoskinson’s proposal may not seem far-fetched some people blamed the crypto industry for the collapse of these banks. Although that may not be true, closure of these banks suggests increased regulatory scrutiny of the financial industry, including crypto. It also shows that the crypto industry is seen as a major threat to the traditional financial system due to its decentralized nature.
Many supporters of the crypto industry have envisioned a time when it will bypass the traditional economy system. While such a day remains a futuristic reality, the industry must struggle to reconnect with the banking system to continue functioning smoothly.
Featured image from Pixabay and chart from Tradingview.com
