The failures of institutions such as Silvergate have negatively impacted cryptocurrency exchanges, but one executive believes the industry can survive without bank support.
Bobby Zagotta, CEO of Bitstamp USA and global commercial officer, says that the fact that customers deposit money into crypto exchanges through traditional banking systems makes them vulnerable to different banking problems. The executive thinks that stablecoins, cryptocurrencies whose value is pegged to fiat currencies or other assets, could solve the banking problem with cryptocurrencies.
“We are currently discussing how stablecoins can offer us an alternative to traditional banking,” Zagotta said in an interview on March 27. He added that stablecoins could potentially unleash new capabilities for the industry, enabling it to view banking from a new angle and return to the origin and purpose of cryptocurrencies.
According to Zagotta, stablecoins offer numerous advantages, including quicker and less expensive transactions, reduced reliance on banks, and increased liquidity. During the banking crisis, stablecoins may continue to change and be added to exchanges as long as regulators approve.
In the interview, Zagotta stressed that the crypto sector must determine why regulators intervened at Signature Bank. This is needed for the industry to ensure that crypto-friendly institutions will continue to run safely and competently. He also cautioned exchanges against increasing customer risk by abruptly transferring customer funds between strained or at-risk U.S. institutions.
According to the executive, Bitstamp presently has 15 banking partnerships worldwide, including U.S. banks such as Customers Bank and MVB Bank and European banks such as LHV Bank and Gorenjska Bank that can also process payments in USD. Zagotta continued, “We are also in conversations to onboard United Texas Bank, Western Alliance Bank, Axos Bank, and Cross River Bank to ensure we maintain a robust network in the midst of all of this change.”
Bitstamp is considering stablecoins as a possible solution to crypto’s banking problem. However, it’s crucial to keep in mind that some significant stablecoins, like USD Coin, do not have a central bank backing.
USDCs are not exempt from banking difficulties. March was difficult for USDC issuer Circle due to its $3.3 billion exposure to the defunct Silicon Valley Bank. (SVB). The events caused the USDC to decouple from the U.S. dollar momentarily.
The banking crisis has been subsiding over the past few weeks, but it is nowhere near over, according to media reports. According to José Manuel Campa, the director of the European Banking Authority, European banks remain vulnerable following the demise of SVB and UBS’s subsequent rescue of Credit Suisse in an emergency.