The Blockchain Association chief policy officer, Jake Chervinsky, said that the rise in adoption of crypto in the U.S. has no impact on the recent high-profile collapses in Wall Street and that just like other traditional finance firms, crypto companies are also exposed to the contagion.
U.S. financial institutions face uncertain times
In an effort to clear any misconceptions about crypto’s role in the current crisis affecting several financial giants in the United States, Chervinsky stated that crypto companies are affected just as much as other institutional customers.
He tweeted that despite crypto firms being blockchain-powered, they also hold fiat currency to pay “salaries, rent, and everything else any other company does.”
The Washington-based lawyer went on to say that the current situation warrants cause for concern from all quarters and contrary to narratives being pushed on social media amid the crisis, crypto is in no way responsible for the collapse.
The financial sector in the world’s largest economy is currently on a knife edge, the banking sector has witnessed a couple of high-profile collapses in the space of days where three large banks in the United States with significant exposure to the technology sector and cryptocurrency have failed.
The crisis started on March 8, when the crypto-powered bank, Silvergate announced that it would suspend its activities due to the huge losses the bank had suffered in its loan portfolio.
Following the collapse of Silvergate Bank, another bank that invested heavily in technology startups and crypto companies, Silicon Valley Bank (SVB), saw its shares plummet to unprecedented levels and was taken over by regulators on March 10.
This spiraled into a full-blown crisis, seriously affecting some crypto companies including Circle, the issuer of the USDC stablecoin.
Soon after, another bank that had close financial ties with SVB was closed by regulators on March 12, citing the risk to customers. The collapse of these banks was similar to the infamous 2008 global crisis, but smaller in scale.
Biden promises stiffer regulations for banks
After the SVB fiasco, U.S. president Biden moved to allay the mounting fears in the country about another nationwide crisis. Biden stated that he plans to introduce “stiffer regulations” for the banking sector to protect the country against similar situations in the future.