Problems in the banking sector have led to uncertainty in the cryptocurrency market. This was stated by representatives of the USDC stablecoin co-issuers – Circle and Coinbase, writes The Block.
On March 11-12, there was a sharp deviation of the USDC rate from parity after the announcement of the storage of Circle in SVB part of the reserve provision of the asset ($3.3 billion).
The situation returned to normal after the decision of banking regulators to rescue depositors of the financial institution. Fed Also launched the program $25 billion in Bank Term Financing (BTFP) to restore confidence in the sector.
In addition to SVB, Circle worked with SBNY and Silvergate Capital, which also crashed recently.
The media found out that the former CFO the infamous Lehman Brothers Joseph Gentile; and Deutsche Bank risk manager Kim Olson, during which the organization paid a $7.2 billion fine for defrauding investors.
Two executives at SVB worked at banks that contributed to the crisis https://t.co/TxM7knPdoJ
— Daily Mail US (@DailyMail) March 13, 2023
“The irony in this black swan that the “infection” did not come from cryptocurrency to Tradfibut from TradFi to cryptocurrencies”, said Caroline Hill, senior director of global policy and regulatory strategy for Circle.
The top manager called for improved regulation of the sector.
“Ultimately we stick to a fully reserved model [стейблкоина]dependent on banks”, she explained.
The Block noted that the events of recent days have further complicated the relationship between TradFi and the digital asset industry. U.S. banking regulators issued a slew of warnings about the risks associated with cryptocurrencies shortly before Silvergate’s troubles, although it was a deposit outflow that led to the institution’s collapse.
EC Development Advisor MiCA Peter Carster acknowledged the challenges for the industry amid the collapse of the three banks mentioned.
“Many banks […] some regulators say they will have nothing to do with cryptocurrencies”he explained.
According to Coinbase vice president of regulatory policy Scott Baugess, the industry is in trouble due to the limited number of banks that keep doing business with crypto companies.
“They strongly concentrate risks in the banking industry. We see that TradFi “infected” the industry, and not vice versa”, – explained the top manager.
Custodia (formerly Avanti) CEO Caitlin Long, whose crypto bank was denied a license by the Fed, was outraged by the regulator’s de facto admission of mistakes in overseeing SVB.
“Mr Barr [ответственный за эту функцию в ФРС], is Custodia’s 100% redundant model insecure and untenable? Aren’t you wondering how we knew and warned about banking problems in advance? Do you want to finally meet?”, she suggested.
Recall that in February, Long allowed corruption in the regulation of crypto companies.
Earlier, Compound founder Robert Leshner did not rule out “Armageddon” in the industry due to the actions of US regulators.
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