The broader cryptocurrency community continues to debate the ongoing fallout from the closure of three major US banks, with orders for neobanking services for the card industry.
Silicon Valley Bank (SVB), which has traditionally served startups in a number of industries in the innovation sector, it was closed by the California Department of Financial Innovation and Protection on March 10.
The reasons surrounding the shutdown are still coming to light, but the news sent shockwaves through the industry. mainly driven per currency USD (USDC) issuer Circle which has more than $3.3 billion of its $40 billion of reserves locked up in the bank.
Signature Bank, which also services some cryptocurrency companies, followed a similar fate in March 12. The New York Department of Financial Services (NYDFS) took possession of the bank to prevent further bank runs as customers sought to withdraw funds from SVB and Signature.
The SVB shutdown was particularly impactful, as the USDC stablecoin briefly lost its $1 peg due to great uncertainty surrounding the effect Circle exposure would have on the ability to manage swaps.
Related: Silicon Valley Bank Collapse: Everything That's Happened So Far
USDC has seen his peg come back up to the $1 mark after Circle CEO Jeremy Allaire announced that the stablecoin issuer has lined up new banking partners starting March 13 in the United States.
Given the tumult of the past few days, the cryptocurrency ecosystem is now taking a closer look at ties to traditional financial institutions that serve fiat currency deposits, withdrawals, and money flows.
Coinbase CEO Brian Armstrong took to Twitter on March 13, saying that the American cryptocurrency exchange had previously considered features that could circumvent or serve to close the gaps experienced in the latest mainstream banking failure.
Ryan Lackey, CSO of cryptocurrency insurance firm Evertas, questioned whether the exchange had considered offering neobanking services to high net worth individuals and companies:
Hey @brian_armstrong and @coinbase -- after the hell of SVB over the weekend, why don't you set up Coinbase as a kind of HNW + corporate neobank, with "moving assets to community banks and treasuries" as a first class option in parallel with crypto ?
โRyan Lackey (@octal) March 13, 2023
Armstrong responded by saying that Coinbase would need to add a number of features and opened the door for comments in the thread:
โDefinitely something we have thought about. I need some more features like outgoing bank transfers, multi-user support, etc. Non-fractional reserve "banking" definitely looks more attractive right now."
coin base confirmed which had about $240 million in Signature Bank on March 10, but expects to recoup all of its corporate cash holdings.
The closure of SVB and Signature Bank raised fears of widespread runs at regional US banks over the weekend. a bloomberg report it also suggests that the US Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) are considering the creation of a fund to cover deposits in troubled banks.
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