How will they affect the crypto industry?

Although the crypto market remains resilient amid a series of collapses, the crypto industry faces a challenging future with tightened oversight and a lack of liquidity with banks under pressure.

Another day, another bank with problems.

Bloomberg revealed that First Republic was close to becoming the latest name on the bank crisis list. The bank is reportedly struggling to maintain its financial stability and has been exploring sale options.

New bank in trouble

On Thursday, Wall Street came to the rescue financed by some of the biggest banks. The list includes JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley.

The Federal Deposit Insurance Corporation (FDIC) earlier stepped in with a bailout for Silicon Valley Bank and Signature Bank, ensuring that customers could access their deposits from Monday this week.

An earthquake hit the banking sector in less than a week after three banks closed their doors, including Silicon Valley Bank and two crypto-friendly banks – Silvergate and Signature.

Silvergate started with a closure and liquidation announcement. Silicon Valley Bank (SVB), which deliberately supports technology startups, collapsed on March 10.

Signature Bank was ordered to cease operations by regulators following these events. However, the move is sparking an ongoing controversy in the crypto community.

Many claim that the US government is trying to crack down on the industry by linking the recent collapses to cryptocurrency.

A quick retort

In response to the allegations, the New York State Department of Financial Service (NYDFS) emphasized that the regulators’ decision had nothing to do with the crypto industry.

The bank shutdown was the result of a crisis of confidence rather than an anti-crypto message.

The NYDFS said it was working with other government regulators to investigate recent incidents. The authorities want to explore the cause of these collapses while helping bank customers get their money back.

Will crypto be in trouble?

The world of finance has been in full swing since the banking crisis, with opinions divided about the role of cryptocurrency. Some experts see it as a potential solution, while others blame the crisis.

Speaking before the Senate Finance Committee on March 16, Senator Michael Bennet suggested that the volatility of cryptocurrency may be the root cause of the failures of crypto-friendly banks.

The Colorado state representative said the nascent industry was not “even as stable as the marijuana industry,”

To prove his point, Bennet showed the case of Signature Bank.

According to the senator, “Signature Bank Failed and Almost a Fifth of Deposits Came from Crypto.” He added, “They’re not allowed to do anything with marijuana, but apparently they can put 20% of this on crypto – a notoriously volatile […] things that no one here even understands and where the value of the assets can rise and collapse.”

Aside from the blame being placed on crypto, the industry faces a bigger problem, as the shutdown of the most crypto-friendly banks could significantly affect the landscape of digital currencies.

Silvergate Exchange Network (SEN) and Signatures Signet are two of the essential on-off ramp services that most crypto exchanges rely on. These platforms play an important role in the industry, enabling customers to make instant payments around the clock.

Shutting down these banks could be a roadblock to the liquidity of Bitcoin and other cryptocurrencies. The absence of these services and options can lead to a difficult period for investors who need to acquire fiat currencies. The industry currently has very few options and may face limited liquidity until new banks emerge

So, what does all this mean for Bitcoin and the cryptocurrency world? Well, it’s hard to say for sure. But one thing is certain: the closure of these banks will have an impact and we will have to wait and see how it all turns out.