More banks will fail without crypto, says Tim Draper

In the midst of the recent banking turmoil, BeInCrypto spoke with renowned investor Tim Draper. We discussed how Bitcoin can prosper from this financial crisis, and what makes a weak leader.

The recent banking crisis has led to growing distrust of once solid banks. The acquisition of Credit Suisse by UBS has contributed to this climate of uncertainty and distrust in the banking system. There have been significant withdrawals from Silicon Valley Bank, First Republic Bank, and Deutsche Bank have been investigated.

Tim Draper, a well-known venture capitalist and entrepreneur, and one of the biggest personalities on Wall Street, believes that there is a simple way to protect oneself from the dangers.

“I have recommended that all CFOs as a hedge against bank or government failure have at least two payrolls worth of Bitcoin to avoid catastrophic failure,” Draper told BeInCrypto. “I continue to advocate Bitcoin as a hedge against the current antiquated and over-regulated banking system and as a hedge against bad government with too much regulation.”

In the latest flight to safety, depositors have shifted assets to “too big to fail” banks as they have questioned the viability of smaller institutions. Unlike traditional banks, which have intermediaries, DeFi can offer financial services to anyone with an internet connection, with transactions recorded on a public ledger. In recent weeks, some people have particularly appreciated the benefit of increased accountability.

Draper told BeInCrypto that this will only accelerate the use of crypto as an alternative to the traditional banking system.

“I think the SVB failure was a wake-up call for people who have been reluctant to buy Bitcoin,” he said. “Now it is mission-critical to keep the trains on the rails.”

Crypto is inevitable

Crypto adoption rates and motivations vary widely between developed and underdeveloped countries and those with stable and unstable currencies. According to a report from the United Nations, Venezuela ranked third among the countries with the most cryptocurrency adoption. Russia and Ukraine hit it off on the league tables.

“Bitcoin is loved by people from countries with weak currencies,” Draper said. “It gives people a chance to build and store value without risk [the] the government overprints and devalues ​​their work. The US seems to be heading down that high interest rate inflationary path and I think more and more people will use Bitcoin to store value now.”

“Banking crises can really only be prevented by allowing banks to accept and operate in Bitcoin. Otherwise, banks will operate with a smaller and smaller market as people move to the better technology,” he added.

Cryptocurrencies have recently come under fire for their use to avoid sanctions. But Draper believes efforts to stop them are futile. Much like King Canute trying to stop the tide from rolling in. “We’re going through an anthropological leap forward with Bitcoin,” he said. – The landscape is changing. Under changing landscapes, great leaders embrace the change. Weak leaders try to resist the tide. Sanctions are porous. Sanctioned countries will use whatever tools they can to get around them.”

Embrace change

Draper’s thesis on economics is equally libertarian – not unlike many crypto enthusiasts. But in this interview, Draper wasn’t afraid to take the philosophy to its logical conclusion. It’s a view deeply intertwined with the individualism and company-first values ​​that crypto enables. “I’ve noticed that good leaders trust their people and set them free,” he explained. “That trust and freedom build good economies, encourage rapid adoption of new and improved products and services. [It] creates a happy, prosperous society. Weak leaders control and regulate their people, creating a fearful, unproductive, impoverished society.”

The current banking crisis seems to have disappeared, for now. However, Draper is convinced that without regulators bringing crypto into the fold, more turbulence is ahead. “If regulators continue to keep banks out of the lucrative crypto market, more banks will fail as more and more of the economy goes to crypto. If they embrace the change, banks will be able to adapt and they will thrive in the new Bitcoin economy.”

Leave it to the market

Draper’s relentless enthusiasm for the crypto market will inevitably be a welcome tonic for some investors. 2022 was a volatile year for cryptocurrency, with values ​​falling over 60%. A new study of over 1,200 Americans found that cryptocurrency awareness has increased by 9% since 2022, but ownership fell from 33% to 30%. Only 1 in 3 owners made a profit that year. Given the choppy waters of late, what’s the best way to ensure the future health of crypto?

“The market will ultimately determine the best outcome,” Draper said. “FTX was a clear signal that centralized authority for any amount of money is not as good as a decentralized system like the Bitcoin blockchain.”

Could he share examples of cryptocurrencies providing financial stability and resilience during the recent crisis? “I know that companies in the Bitcoin world that held their fiat in SVB, but also held Bitcoin, were not in panic mode. Because they knew they could always make a salary in Bitcoin,” Draper reflected.