The Crypto Bros Are Fast Becoming Unbankable
Regulators are right to widen the firebreak between the traditional banking system and decentralized finance.
Not for long.
Photograph: Milan Jaros/Bloomberg
Crypto bros are quite literally becoming bankless and unbankable. By abruptly bundling crypto-friendly Signature Bank — one of the last of its kind — into receivership amid an extraordinary weekend operation to backstop the US banking system, regulators are sending a message that volatile tokens and decentralized finance need to be kept far away from TradFi. Given echoes of the global financial crisis and with market jitters spreading around the world, that’s no bad thing.
Regulators have been warning for some time of the myriad crypto risks seeping into the mainstream banking system, comparing them directly to the $1.3 trillion subprime mortgage market that incentivized greed, exploited regulatory arbitrage and eventually led to the 2008 economic meltdown. A first warning shot fired by banking watchdogs in a joint declaration in January, weeks after the epic collapse of FTX battered crypto markets, promised more scrutiny over issues including unstable deposit flows, poor legal compliance, concentration and counterparty risk.