July 12, 2023
Quartz recently published an article where Questrom’s Master Lecturer of Finance, Mark Williams, discussed the risks associated with mixing crypto with the regulated banking system.
In response to the recent failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, Williams noted the little focus has been placed on what exactly triggered the collapse: crypto banking. In addition to crypto customers being allowed to move money 24/7, 365 days a year, 95% of crypto deposits were non-insured by the Federal Deposit Insurance Corp. (FDIC), increasing the likelihood that depositors would pull their finances at the first sign of trouble.
Williams emphasized that, “unchecked, and unwatched, the crypto sector can be determined to bank financial health and presents spill-over danger to our larger, regulated financial sector” and that, “events of this past spring prove that policymakers and regulators need to closely examine how best to wall off crypto banking risk.”