Banks Pose a Risk to Crypto, Not Vice Versa
The collapse of the three “S” banks – Silvergate, SVB, and Signature Bank – left a bitter taste in the crypto companies’ mouths. This includes Circle, the issuer of the USDC stablecoin.
In an interview with World on the Block, the chief strategy officer and head of global policy at Circle Internet Financial Dante Disparte shed light on the traditional banking system in light of the recent implosions.
He emphasized that the collapsed banks are major lenders to the crypto industry – and their demise shows the risks that traditional financial institutions pose to the crypto ecosystem.
“The bank failures in the United States have demonstrated that banks themselves are introducing risk to crypto assets, versus the inherent direction of travel of risk, that a lot of the regulators were concerned about, is that crypto would introduce risk to banking,” he told World on the Block, saying that Circle had a $3,3 billion exposure to SVB.
He also added, “all too often cryptocurrencies are framed as an innovation that would kill banks and have no dependencies on Wall Street but the operating reality is that these two innovations need co-existence and have deep co-dependency.”
So, if a regulated company like Circle can’t have confidence in banks for “something so simple as a de minimis share of USDC reserves held in counterparty banks for transactional services or deposit-taking services, then there’s a bigger loss of confidence in the U.S. economy.”
Disparte also added that cash and short-dated treasuries make up USDC reserves, saying that Circle is prepared to meet redemption demands.
He also emphasized the need to mint new USDCs to provide a digital form of dollars for investors to protect themselves from economic risks.
“All of these risks start to accrue to urgency from legislators, policymakers, and regulators to begin to protect consumers at the comprehensive whole of government level, as opposed to relying on this patchwork approach that we have in the United States for regulating this industry,” he noted.
Circle is the issuer of USDC, the dollar-backed stablecoin. It depegged last weekend yet regained its dollar parity on Monday.
Previously, GNCrypto reported that Mastercard has started delivering USDC payments to Web3.
