Crypto or Banks? Experts Weigh In on Biggest US Bank Failures

• Many people have asked if crypto played a part in the collapse of Silicon Valley Bank and Signature Bank.
• Experts say that crypto had nothing to do with these failures, but rather lax banking regulations and overconcentration of customers in single areas were to blame.
• Boston College law professor Patricia McCoy also suggested that holding large amounts of USDC didn’t help matters.

Did Crypto Cause Banks to Fall?

With the fall of Silicon Valley Bank and Signature Bank, many people are wondering if crypto played any role in the crumbling of both financial institutions as they were the number two and number three largest bank failures in US history.

Experts Weigh In

David Yermack – professor of finance at NYU’s Stern School of Business – explained that crypto is more or less a bystander in all of this, just like all the other companies who had deposited money. He stated there are two main issues that caused the banks to shutter: thinning out banking regulations over the last six years and an overconcentration of customers in single areas.
Boston College law professor Patricia McCoy also threw her two cents into the mix, saying that holding large amounts of the crypto USDC may have contributed to intensifying bank runs at Silicon Valley Bank.
Yermack concluded with how banks should have written their bonds down to value in real time so problems would become apparent much earlier.

The Role Of Crypto

Many experts agree that crypto has no role in causing these banks‘ demise; however, some suggest it did not help matters either. The only role it appears to have played was Circle’s large deposit at Silicon Valley Bank which was very prone to risk and prompted Circle’s natural response – withdrawing its entire very large deposit when it became nervous about Silicon Valley Bank’s stability.

Banking Regulations

The main culprits behind these collapses appear to be due partly because banking regulations were thinned out over the last six years which led them into instability as well as being too concentrated on single areas such as technology industry on the west coast for Silicon Valley Bank leading them unable to pay back loans if customers became correlated together not being able pay back simultaneously rendering those loans less valuable.


To conclude, while experts agree that crypto had no direct part in causing these bank collapses, its indirect involvement through Circle’s large deposits at Silicon Valley Bank exacerbated certain issues surrounding their demise such as panic inducing withdrawal requests from Circle when it became aware of potential instability at SVB further compounded by lax banking regulations coupled with an overconcentration on a single area leading them unable to recover financially from correlated customer debt defaults eventually resulting in their closure leaving us with this lesson – stricter regulation needs must be implemented prior any more major collapses occur within our financial systems worldwide .

About the author