Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
As the Senate Banking Committee prepares to discuss new laws to regulate the cryptocurrency market this week, a warning from a prominent Democratic senator has rekindled the debate about the role of cryptocurrencies in the US financial system and their connection to the failure of banks in 2023.
The senator says the collapse of the Silicon Valley bank was not unusual, but an early sign of what happens when a cryptocurrency-related project collides with an already fragile bank.
The warning is based largely on the findings of a 292-page investigation released last September by the Senate Permanent Subcommittee on Investigations.
The senator warns: “cloud runners” in the era of cryptocurrencies escaped scrutiny until it was too late.
in An opinion piece was published On Fox News, Senator Richard Blumenthal examined the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, all of which received favorable ratings shortly before the collapse.
The senator said that the calculations masked the growing risk associated with fast deposits, opaque features, and a business model that is highly sensitive to cryptocurrencies and capital that comes in quickly and leaves quickly.
According to the senator’s account, the collapse of the Silicon Valley bank followed a familiar pattern.
During the booming financial years, the bank attracted large deposits from technology start-ups and capital-backed companies, including companies linked to the cryptocurrency sector.
When the tables turned after interest rates rose and major cryptocurrency companies like FTX collapsed, confidence was shattered. Fear spread quickly through digital media, and takedowns were higher than ever.
Regulators eventually stepped in to stem the economic spread, distributing up to $340 billion in emergency aid. However, $54 billion worth of stocks and bonds has evaporated.
Senema pointed to Signature Bank as a clear example of the risks associated with cryptocurrencies. Signature Bank has actively researched the digital asset industry and built a large base related to cryptocurrencies.
When FTX crashed at the end of 2022, the deposits came out in a big way.
Investigators repeatedly assured the public that the threat was over, and the bank was closed months later.
For the senator, this failure shows how the complexity and lack of transparency of cryptocurrencies can prevent traditional oversight before regulators can respond.
It is worth noting that this concern also extends to fiat currencies, which the senator describes as “digital dollars” that are marketed as alternatives to bank savings.
With the stablecoin market estimated to be worth around $300 billion, and predicted to quadruple by 2030, he warns that losses could be huge if safeguards are not put in place.
Since the launch of the GENIUS command last summer, several stablecoins have temporarily lost their pegs, wiping hundreds of millions of dollars off their value.
How mass exodus in the crypto era eluded oversight until it was too late
Cryptocurrency industry statistics strongly contradict this ideawhere market commentators and officials argue that the criticism of cryptocurrencies in the Silicon Valley bank collapse is also well documented.
He also points to the failure of Silicon Valley’s biggest bank as a case of mismanagement of interest rates.
The bank invested heavily in long-term US Treasuries when interest rates were low, and failed to hide this.
When prices soared, losses were locked in because more than 90% of the money was uninsured and concentrated among closely related professionals, making withdrawals inevitable when trust was lost.
Critics say that Silvergate Bank represents another problem, as its collapse was directly related to the instability of the cryptocurrency market and the loss of confidence after the failure of the FTX platform.
Deposits fell by 68% in one quarter, forcing the bank to sell assets at a loss of $718 million and eventually liquidate it.
Even in this case, crypto advocates say that the risk of stability and the volatility of the site were important, while cryptocurrencies act as an enabler rather than the main reason.
He also rejects the idea that “fast digital” projects are specific to cryptocurrencies.
Bulk withdrawals from banks have been done for centuries without mobile phones or blockchain technology. They say that technology has accelerated the process, but it has not created a threat.
A note Senator Warns: Cryptocurrencies Threaten to Increase Bank Collapse – and SVB Was ‘Foreseeing’ appeared for the first time Cryptonews Arabic.
