The fall of Silicon Valley Bank is being felt throughout the entire banking system. It is a medium-sized lender specializing in financing technology startups. Of course, the problems actually started with the loss of value in their holdings in the bond market. In summary, one could say that this collapse is the result of having cheap money for so long and then stopping the party. What we had here was the classic mismatch between liabilities, assets and liquidity. The bank’s money was in illiquid assets and depositors will start closing their accounts all at the same time. Early attempts to raise capital failed, and shares plummeted.
HSBC bought the bank’s UK assets. But US regulators failed to find a buyer in time for the US assets. Two days after Silicon Bank collapsed, it was the turn of Signature Bank, a New York-based bank. The incredible thing about all this was the speed with which the events unfolded. Of course markets were affected by this. And billions of dollars have been lost in a matter of days with the collapse of stock value in the banking sector.
What will be the next bank to fail? In fact, several regional banks are already in the crosshairs. And worry, of course, is a domino effect. The Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation, in coordinated action, stepped in to protect Silicon Valley and Signature Bank depositors. In this way, they set up a facility that allows banks to use emergency funds. This, in theory, should be enough to solve the liquidity crisis.
On the other side of the pond, Credit Suisse has agreed to take a nearly $54 billion bailout from the Swiss central bank. The same old story. This is mismanagement of risk. During the bonanza, many risks were taken to maximize profits, but things haven’t been going well lately. Unfortunately, investors have lost confidence in the institution. A larger bailout will surely be necessary. I assume that the authorities will not allow the bank to fail, because doing so would put the whole system at risk.
Who will be the winners in all this? Bitcoin? Gold? The promoters of both assets will undoubtedly use this juncture to attract buyers with their respective anti-establishment narratives. Which could produce some short-term gains. However, in my opinion, in the long run, the winners in this story will be the big banks. The rise of the dollar, in the middle of the week, could be interpreted as a sign of confidence. I mean, it is quite likely that the money will leave the small banks to go to the big banks.
Now, let’s talk about the top crypto news of the week according to Cointelegraph in Spanish. This is not a news summary. This is an opinion article. The intention is to reflect on the following headlines in a skeptical and critical way. This is an article for free thinkers.
SWIFT starts next phase of CBDC testing after positive results
SWIFT is an international banking network. Actually, it is not a technology. That means the network can be upgraded and you can use the technology that best suits your needs. SWIFT can then use blockchain technology to improve its communication systems. And, in my opinion, it is the most likely scenario. Frankly, I don’t think the SWIFT network will be supplanted by blockchain technology. I am referring to blockchain projects that claim to have better technology. And the network? A network like the SWIFT network is not built in a day.
Lawyers for Sam Bankman-Fried point to need to delay October criminal trial
Lawyers will be the real winners in all of this.. Every week is something new with this. And what’s missing!
The US Federal Reserve will create a new cryptocurrency team amid concerns about unregulated stablecoins
It is fair and necessary. Also, it’s unavoidable. This is coming whether we like it or not. Here the dilemma does not revolve around regulation or non-regulation. What should concern us is not obtaining a bad regulation. All efforts should be in obtaining the best possible regulation. What is the best regulation? A regulation that protects the user without harming the issuer.
Coinbase CEO Considers Adding Banking Functions After Silicon Valley Bank Crisis
You don’t have to be a genius to know that this is the future. Cryptocurrency exchanges will become neobanks. And traditional banks will offer products and services from the crypto world. Capitalism does not stop. We will always have people wanting our money. And, to achieve this, they will bring out products and services of interest. Frankly, it is very difficult to have all our money under the mattress (self-custody) forever.
Biden vows to protect SVB and Signature Bank depositors without hurting taxpayers
Here is one of the benefits of having money in a US bank. Certainly, not everything is rosy. However, it would be an exaggeration to suggest that it is all bad. Regulation in the United States requires banks to insure their deposits. That is, each bank pays special fees that cover the risk of bankruptcy. I mean, “liquidity injections” are not a gift. These are mechanisms that have been previously designed to protect depositors.
Suppose we have health insurance. We get sick and the insurance covers our medical expenses. Is that unfair? Many documentaries on Youtube tell us that liquidity injections are a gift to greedy bankers. Naturally, that arouses public outrage. But, in these videos, they forget to explain about the funds and the institutions that have been created, previously, to strengthen the banking system. The banks are the ones that pay for that protection. So, when a bank gets into trouble, these protection systems kick in. And they are activated to protect depositors’ money and to protect the integrity of the banking system in general.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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