As some of the cryptocurrency industry’s go-to banks failed, Bitcoin’s importance was on display while its on and off ramps suffered.
This is an opinion editorial by Karen Shidlo, a blockchain-focused content creator.
The recent news of Silvergate Capital, Silicon Valley Bank (SVB) and Signature Bank shutting down has sent ripples throughout the financial community. These three banks had become some of the most popular banking partners for cryptocurrency exchanges and companies, and their sudden closures left many in the industry scrambling to find new partners.
What Impact Will This Have On Bitcoin?
Looking at the cryptocurrency industry as a whole, the closures will make it much more difficult for companies and exchanges in this space to find banking partners, including Bitcoin-only operations. With fewer options available, these companies will have to spend more time and resources searching for banks that are willing to work with them, which could slow down their growth and development.
The closures could also lead to increased regulatory scrutiny of the cryptocurrency industry. If the closures were indeed due to regulatory pressure to stifle the growth of cryptocurrency, as some have speculated, it could signal that regulators are becoming more serious about cracking down on Bitcoin-related activities. This could lead to further restrictions on Bitcoin exchanges and companies, making it even harder for them to operate.
On the other hand, “the collapse of Silicon Valley Bank (SVB) is a blessing for bitcoin (BTC),” according to a recent CoinDesk article, which noted parallels between the ways that these bank failures have drawn attention toward bitcoin with the 2013 Cyprus financial crisis, which underscored flaws in the fractional reserve system.
Bank uncertainty emphasizes the point that customers' funds aren't as safe in regulated banks as they have been made to believe, and only validates Bitcoin's appeal as a decentralized, peer-to-peer network and seizure-resistant cryptocurrency facilitating the self custody of funds.
While it’s been the norm — especially in the western world — to feel comfortable under false pretenses that traditional financial institutions are “safe” and “well regulated,” history continues to reveal that banks are capable of making bad decisions. Undoubtedly, this is a good form of advertising for Bitcoin. The SVB scandal has emphasized its intended use case: to provide an alternative payment system that would operate free of central control but otherwise be used just like traditional currencies.
Adapting Amid Banking Chaos
The Bitcoin industry still faces many challenges, particularly when it comes to regulation and adoption. Governments and central authorities have been slow to embrace cryptocurrencies, and many countries have introduced regulations that make it difficult for Bitcoin companies to operate. In addition, many individuals and businesses are still wary of Bitcoin, viewing it as risky and volatile.
Despite these challenges, the Bitcoin industry is adapting and evolving at a rapid pace. As banks face increasing uncertainty, Bitcoin offers an alternative financial system that is decentralized, transparent and open to anyone. The principles of decentralization that underpin Bitcoin offer a glimpse into a future where financial services are accessible to everyone, regardless of their location or financial status.
But it’s clear that there is still a need for “on and off ramps” for converting bitcoin into traditional currencies and back again. This raises a pertinent question which will undoubtedly have an impact on the Bitcoin industry moving forward: Has mainstream banking’s affair with bitcoin ended before it ever really began?
This is a guest post by Karen Shidlo. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.