The cryptocurrency community is reeling from the fallout of the closure of three major American banks, with many calling for neobank services to be established for the industry.
On March 10, Silicon Valley Bank (SVB), which traditionally served startups across several innovation sector industries, was shuttered by California’s Department of Financial Protection and Innovation.
This news caused shockwaves throughout the industry, primarily driven by USD Coin (USDC) issuer Circle having over $3.3 billion of its $40 billion reserves locked up in the bank.
Signature Bank, which also serves cryptocurrency firms, met a similar fate on March 12, with the New York Department of Financial Services taking possession of the bank to prevent further bank runs.
The closure of SVB was particularly hard-hitting, with the USDC stablecoin briefly losing its $1 peg driven by major uncertainty around the effect Circle’s exposure would have on its ability to manage redemptions.
However, USDC has seen its peg creep back up to the $1 mark after Circle CEO Jeremy Allaire announced that the stablecoin issuer has lined up new banking partners in the United States.
In light of the recent banking failures, the cryptocurrency ecosystem is now taking a closer look at ties to traditional finance institutions that serve fiat currency deposits, withdrawals, and monetary flows.
Coinbase CEO Brian Armstrong took to Twitter on March 13, saying that the American cryptocurrency exchange has previously considered features that could potentially bypass or serve to bridge gaps exposed in the latest mainstream banking failure.
Ryan Lackey, chief strategy officer of cryptocurrency insurance firm Evertas, questioned whether the exchange had considered offering neobanking services to high-net-worth individuals and businesses.
Armstrong replied by saying that Coinbase would need to add a number of features and opened the door for comments in the thread. Coinbase confirmed that it had around $240 million held at Signature Bank on March 10 but expects to recover all of its cash holdings.
