• Insolvency of established crypto financiers
• Signature Bank’s crypto business: cause or impetus for closure?
• Will the “Web 3 bubble” burst?
In an interview with BTC-ECHO last year, software developer Molly White, known for being a crypto critic, said of Web 3: “It’s pure marketing. People couldn’t hear the word crypto anymore, so you started to pitch them the Web 3. They wanted a new argument for why crypto is worth something – and is going up in price.” In the interview as well as in her well-known blog “Web 3 is Going Just Great”, White describes the crypto industry as a pure “bubble” that cannot keep its promises in terms of decentralization, problem solving through technology and value increase by a long way, and humorously analyzes scams and hacks.
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In a lecture at the “South by Southwest” conference in Texas, the crypto critic now sees massive financing problems for the industry. In her contribution entitled “The bursting of the Web 3 bubble”, she describes the financing of crypto projects as a concrete threat as a result of the disappearance of the established banks. Because, both Silvergate and the Silicon Valley Bank and the Signature Bank were known as crypto financiers.
Signature Bank Shutdown: Is it Linked to Bank’s Crypto Business?
Media reports have suggested that the closure of the New York bank was mainly due to the bank’s proximity to crypto and was therefore an exaggerated measure by the regulators. Signature board member Barney Frank even suspected an “anti-crypto message” from regulators behind the bank closure, according to Cointelegraph.
In the past, Signature Bank was active in the crypto sector as a financing partner for Coinbase, BitGo and the insolvent crypto lending service Celsius, but said it had already reduced its involvement in the industry last year.
Reuters initially reported, citing two sources, that Signature Bank would have to halt all crypto dealings – even after a sale. However, this was subsequently denied by the supervisory authority. US Representative Tom Emmer is also concerned that the US government is arming itself against the crypto industry. “These measures to weaponize the recent instability in the banking sector, sparked by catastrophic government spending and unprecedented hikes in interest rates, are deeply inappropriate and could lead to broader financial instability,” Cointelegraph quoted in a letter to FDIC Chairman Martin Gruenberg .”
According to other news agency reports, however, Signature Bank failed to provide “reliable and consistent data” to regulators. In mid-March, shareholders filed a class-action lawsuit alleging fraud and concealment against Signature Bank CEO Joseph J. DePaolo and other executives, Reuters reports. In the justification, the plaintiffs accuse the bank of having made misleading statements about the financial situation and liquidity of the financial institution just a few days before the closure. Also analysts from JPMorgan
were still optimistic about the bank papers shortly before closing.
Bank Collapse: Impact on the Crypto Industry
After the collapse of the banks, Molly White believes that financing crypto projects will be (even) more difficult in the future and compares the situation to 2017 and 2018, when crypto companies struggled to access banks . Even in recent years, there have only been a few banks in the US that would have been willing to finance crypto projects – the best known: Silvergate Capital and SVB. “Without [Signature und Silvergate] I think the crypto industry will have a hard time. They will either have to find other banks willing to work with them, which has already been difficult and will likely be even more so after these banks’ failures, or they will have to turn to some of the more shady shadow banks,” the crypto critic said according to Cointelegraph at the SXSW conference in Austin.
Unlike Molly White, well-known tech investor and crypto fanatic Cathie Wood says the current weakness in traditional banking is a testament to the strength of cryptocurrencies. The collapse of the banks was “obvious to everyone” in advance, while Bitcoin, Ethereum and Co. did not show the volatility expected by many, but acted as a “safe haven” similar to gold.
While Cathie Wood sees the solution to the problems of traditional finance in the crypto sector, Molly White points to corruption, false promises and failed crypto projects and their effects on the financial market and society. In view of the strict regulatory measures announced several times by the US government and the loss of established financial partners, it remains to be seen how the crypto industry will develop in the current situation.
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