SVB, Silvergate and Why Crypto Still Needs Banks

Crypto’s ardent supporters present it as the future alternative to regular money. For now, though, most so-called digital currencies still rely on old-fashioned banks. Investors need an “on-ramp” and “off-ramp” to cash in and out. The risks this creates were on display when two crypto-friendly US banks collapsed in March. Then the US affiliate of Binance Holdings Ltd., the world’s biggest crypto exchange, said in June it was being cut off by its payment and banking partners. The collapse of these vital bridges between the worlds of real and virtual money is another setback for a crypto industry that’s still struggling to recover from a dire 2022.

An on-ramp is somewhere investors can exchange regular currencies such as US dollars or euros from their bank accounts for cryptocurrencies such as Bitcoin or Ether. An off-ramp swaps crypto assets for traditional money. This mostly happens via crypto exchanges such as Coinbase and Kraken as they accept money through bank transfers or credit card payments. It’s possible to trade crypto tokens “peer to peer,” without using a regular bank, but as very few products or services can be bought with digital currency, investors usually need to off-ramp before the proceeds can be spent.