In its early days, crypto enthusiasm was fuelled by the promise to cut the rigged banking system out of the people’s basic need to exchange goods and funds. To some degree, it still is. But as digital assets become more and more intertwined with a larger financial market, this tension gradually fades away.
“During the [2008] financial crisis, there were investors and owners of systemic large banks that were bailed out,” as Treasury Secretary Janet Yellen, but this time, it was depositors who got their back covered by the Deposit Insurance Fund, supplied by the banks, not taxpayers. Although the DNA of the crypto community would oppose a bailout, Tony Petrov, chief legal officer at risk management platform Sumsub, told Cointelegraph that, sometimes, it is very important to at least attempt to save valuable institutions on the border of crypto and fiat — especially given the obvious scarcity of such institutions.
The bank served a tightly knit set of customers, including a group of startups and their investors. Ismail said that it aimed for rapid growth without adequately diversifying its business or clientele: Even before the collapse of Signature, SVB and Silvergate, there were only a handful of entities willing to bank crypto companies. It’s impossible for a crypto company to diversify its assets across many different institutions since there aren’t 20 banks that will have it: