Bank Failures Not Caused By Crypto – Top US Treasury Official
The crypto industry has gained traction in recent years with its innovative use of blockchain technology and skyrocketing asset prices. Still, its connection to the financial sector has been in serious debate.
A top US Treasury official recently addressed the issue at a House Financial Services Committee hearing, stating that cryptocurrency had no “direct role” in the recent failures of two US banks, Signature Bank and Silicon Valley Bank.
Cryptocurrency Not Responsible For Bank Crisis – Nellie Liang
Nellie Liang, the Undersecretary for Domestic Finance in the United States Treasury Department, opined that the digital assets sector should not be held responsible for the recent collapses of Signature Bank and Silicon Valley Bank.
She stated, “I don’t think cryptocurrency directly impacted either of the failures.” Meanwhile, Martin Gruenberg, FDIC Chairman, had previously reported to the legislators that by the end of 2022, nearly one-fifth of Signature’s deposits were connected to crypto users.
The crypto industry’s connection to two of its former favored banks didn’t go unnoticed during the Senate and House of Representatives two-day hearings into the shortcomings of Signature and Silicon Valley. They claimed that the two regional loan providers and the smaller Silvergate Bank took chances with their business operations, leading to their regulators questioning their ability to withstand future liquidity risks.
Michael Barr, Vice Chairman for Supervision at the Federal Reserve, mentioned that the difficulties encountered by SVB originated from “classic interest rate risk mismanagement.” The banks certainly had massive funds from cryptocurrency firms not covered by insurance.
Circle And SVB’s Issues
Circle reported on March 10 that 8% of the total reserves backing its USDC coin were still deposited at Silicon Valley Bank (SIVB) even though regulators shut down the lender earlier in the day due to run-on deposits.
Dante Disparte, Circle’s chief strategy officer, commented that the company is “protecting USDC from a black swan failure in the US banking system.” He added that the failure of SVB without any federal rescue plan would have “broader implications for business, entrepreneurs, and banking.”
Ultimately, the Treasury official’s statements provide some comfort to those who may have been concerned that crypto was a factor in the recent bank failures. Nevertheless, the industry is still evolving, and there is much to be learned regarding the use of blockchain technology in facilitating financial transactions.
Tokenhell produces content exposure for over 5,000 crypto companies and you can be one of them too! Contact at info@tokenhell.com if you have any questions. Cryptocurrencies are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by Tokenhell authors (namely Crypto Cable , Sponsored Articles and Press Release content) and the views expressed in these types of posts do not reflect the views of this website. Tokenhell is not responsible for the content, accuracy, quality, advertising, products or any other content or banners (ad space) posted on the site. Read full terms and conditions / disclaimer.
