Collapse of Silvergate and Silicon Valley Bank represent a challenge for crypto
The collapse of Silicon Valley Bank (SVB) and Silvergate Capital, some of the most crypto-friendly banks in the industry, has forced many crypto firms to hold their breath. The loss of a significant banking partner for many companies means it will be even harder for them to comply with regulations and offer their services in a way that is consistent with the expectations of the United States Securities and Exchange Commission.
In the aftermath of the banks’ collapse, the second-most liquid U.S.-dollar pegged stablecoin, USD Coin (USDC), temporarily lost its peg and fell below $0.87, as its issuer, Circle, admitted that it held $3.3 billion at SVB. Within the crypto industry, Circle is one of the better-known, “mature” players, so the news understandably shook investors, forcing many to lose their confidence in cryptocurrencies once again.
It is obvious that the collapse of SVB and Silvergate has and will continue to challenge the crypto industry as a whole. In addition to that, it has also created uncertainty as banking partnerships are crucial for the infrastructure that enables crypto companies to operate.
This is especially evident with stablecoins like USDC that rely on banking partnerships to ensure their value is pegged to the U.S. dollar. But what does the collapse of a banking partner mean for the future of stablecoins and the overall crypto industry?
Related: Blame traditional finance for the collapse of Silicon Valley Bank
In general, a collapse such as this can cause instability in the value of a stablecoin because of how dependent they are on real-life assets. However, in the long run, a situation like this could also put pressure on other major crypto players like Bitcoin (BTC) and Ether (ETH), which
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