Crypto assets are not the cause of the bank run, but the solution[Column]| coindesk JAPAN | Coindesk Japan


The US Federal Deposit Insurance Corporation (FDIC) announced late on March 26 that the failed Silicon Valley Bank was to be acquired by First Citizens Bank.

Bank runs and bankruptcies occurred not only at Silicon Valley Bank, but also at Silvergate Bank and Signature Bank, and concerns about bank runs at First Republic Bank spread. Furthermore, the banking crisis spread across the sea to Europe, and the Swiss National Bank (central bank) loaned 50 billion Swiss francs to Credit Suisse.

But the collapses of Silvergate Bank and Signature Bank, two of the crypto firms’ biggest clients, especially gave the impression that the U.S. government wants to keep crypto out of the country.

For those who specialize in finance, it might feel like it’s time to step away from crypto and stop pouring any more energy into it. But in reality, it may be the best time to embrace crypto and learn more. The purpose of the Bitcoin blockchain was to prevent the kind of crisis that is now spreading in the traditional banking world, and that is why cryptocurrencies should continue to spread.

Many features of crypto-assets and blockchain technology can be solutions to the problems we face today. Self-custody, transparency and instant settlement are characteristics of crypto assets that can lead to increased adoption.

self custody

Banks and financial institutions are in custody of most of our financial assets, including cash and securities. Banks and financial institutions manage and store assets on our behalf.

These methods arose out of necessity. For many years it was impractical for us to keep our own assets. We have relied on custodians to run our entire financial system, including trading, lending and borrowing.

The result has been extreme government regulation of custodians and, largely because of that regulation, unconditional trust in them.

In short, most Westerners consider their assets in licensed banks to be safe. Banks can’t take too many risks with their deposits.

But the past few weeks have revealed that even with regulations, money in banks may not be safe.

Crypto assets, on the other hand, are based on the idea of ​​“self-custody.”

I believe more people and businesses will consider crypto self-custody as an option for some assets. Not necessarily because people and businesses invest in crypto, but because they view it as a way to avoid relying on government-regulated custodians.

Only when we all manage our own assets can the system truly reach its efficiency.


Many of the current issues and regulations are about transparency, or lack thereof. One of the purposes of US financial institutions’ registration with states, the Federal Reserve Board (FRB), and the Securities and Exchange Commission (SEC) is to release financial information so that we can make risk-based decisions. to make it easier. But that transparency is usually quarterly and not real-time.

The recent bank run was driven by liquidity concerns, not solvency concerns. Depositors feared falling behind others and running out of money to withdraw.

As with cryptocurrencies, if the asset pool were exposed in real time, all depositors could see exactly how much liquidity there was, and could rationalize their relative need to withdraw efficiently rather than out of fear. can be determined objectively.

Immediate settlement

To add value and service to depositors and other customers, banks and other custodians need to lend out of their deposits or invest in low-risk assets to capture yield.

Of course, there is a time lag between loans and securities. Securities are typically highly liquid markets, but do not have instant settlement and must follow specific market trading hours.

In the latest bank run, panic spread overnight and over the weekend, a difficult time for banks to sell securities and have free capital.

Cryptocurrency systems, by contrast, are always on and capable of instant or near-instant settlement. If I send you Bitcoin (BTC), Ethereum (ETH) or USD Coin (USDC), it will immediately move from my wallet to yours and the transaction will be settled. No need to wait for the market to open or for funds to move from my account to yours. Blockchain-based transactions are settled and confirmed instantly.

prove the need

Over the past few years, with the volatility of crypto-asset prices, increased media coverage, and growing debate about crypto-assets, many naysayers have argued that crypto-assets are not “necessary” and justify their value. I have argued that I cannot. Even I, who is in the position of educating financial professionals, have said that crypto assets are not necessary in American and Western democracies.

But time and time again we have witnessed the need for the features of blockchain, crypto assets and DeFi (decentralized finance). We are beginning to see individuals and companies realize that a better financial system exists. A better financial system is one that can be used for financial transactions without government intervention, policies, or printing money.

As that recognition emerges, and as crypto custody becomes more secure, there will be a natural shift towards crypto and blockchain. But that requires the help of a financial expert. Financial experts can take the current situation as a sign that the U.S. government is anti-crypto, or that we need a crypto ecosystem.

Now might be the perfect time to start learning about crypto assets and deciding how best to incorporate them into your portfolio.

The next crypto bull market will not be based on speculation. It should be based on widespread adoption and use by the general public and businesses that see crypto as a viable and necessary alternative to the current financial system.

|Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Alexandros Michailidis /
|Original: Crypto Is the Solution to Bank Runs, Not the Cause

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