The crypto industry lost a number of banking on- and off-ramps due to the recent turmoil in the U.S. banking industry, signaling that there may be a shift in the space toward decentralization and a need for regulation going forward.
Last week, Silvergate Capital, Silicon Valley Bank and Signature Bank all shut down or were closed, which resulted in crypto companies and users alike scrambling to move their assets.
“Silvergate and Signature serve as the major on- and off-ramps for the crypto space with their SEN and Signet products, respectively,” Aaron Rafferty, CEO of Standard DAO, said to TechCrunch+. “The tie for SVB was more on the side of major startup and VC capital for the space with organizations like Lightspeed, Y Combinator.”
The shuttering of these banks also has bigger implications on the crypto industry because some of them were providing services to the industry, Mina Tadrus, CEO of quant investment management firm Tadrus Capital LLC and general partner of Tadrus Capital Fund, said. “These banks enabled cryptocurrency traders and companies to deposit, transfer and convert fiat currency into digital assets such as bitcoin, ethereum and other cryptocurrencies.”
With these banks’ closure, it will become difficult for cryptocurrency businesses to move money between entities and access banking services, Tadrus noted. “Furthermore, such closures could mean reduced trust from investors who may no longer be aware of the necessary safeguards involved in their bank transactions.”
This could lead to an overall decline in participation within the crypto community and ultimately could decrease liquidity within crypto markets and make it difficult for crypto startups to build new products or remain operational in the long term, Tadrus added.