Bank failures like Silvergate have undoubtedly hurt cryptocurrency exchanges, but one executive believes there are ways for the sector to survive without the support of banks.
Cryptocurrency exchanges are heavily dependent on traditional banking systems for customer deposits, making them vulnerable to various banking issues.according to Bobby Zagotta, CEO and Global Head of Business at Bitstamp USA.
The executive believes that stablecoins — cryptocurrencies whose value is tied to fiat currencies or other assets — could be a solution to the cryptocurrency banking problem.
“We are currently discussing how stablecoins can offer us an alternative to traditional banking”Zagotta said in an interview with Cointelegraph on March 27. He added that stablecoins could potentially unlock new capabilities for the industry, allowing it to look at banking from a new perspective and return to the genesis and purpose of the crypto sector, adding:
“One of the fundamental principles of our industry is to allow people to transact without relying on third-party institutions, so there are other possibilities to explore, such as the use of stablecoins to reduce frictions born from the banking system.”
According to Zagotta, stablecoins offer many advantages, such as faster and more profitable transactions, less reliance on banks, and greater liquidity. “Depending on regulation, we may see continued evolution and integration of stablecoins on exchanges amid the banking crisis,” the executive said.
In the interview, Zagotta stressed that the cryptocurrency industry needs to find out the factors that led regulators to intervene in Signature bank. This is necessary for the industry to ensure that cryptocurrency-friendly banks operate securely and sustainably in the future. He also warned exchanges against creating more risk for clients by hastily moving client funds between different US banks that may be stressed or at risk.
According to the executiveBitstamp currently has 15 banking associations around the world, including US banks such as Customers Bank and MVB Bank, as well as European banks such as LHV Bank and Gorenjska Banka, which can also process payments in US dollars.. “We are also in discussions to bring on board United Texas Bank, Western Alliance Bank, Axos Bank and Cross River Bank to ensure we maintain a strong network amid all this change,” Zagotta added.
Although Bitstamp is considering stablecoins as a possible solution to the cryptocurrency banking problem, It should be noted that some of the major stablecoins, such as USD Coin (USDC), are not immune to banking problems.. USDC issuer Circle ran into significant trouble in March due to its $3.3 billion exposure to the collapsed Silicon Valley Bank (SVB). The events caused the USDC to briefly lose its 1:1 peg to the US dollar.
The media are reporting that the banking crisis has subsided in recent weeks, but it is nowhere near over. According to José Manuel Campa, director of the European Banking Authority, European banks remain vulnerable after the demise of SVB and the subsequent emergency bailout of Credit Suisse by UBS.
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