Coinbase’s CEO contemplates banking after SVB’s fall

The cryptocurrency community as a whole continues to discuss the aftermath of the collapse of three large US banks, with neobank services for the sector on the horizon.

On March 10, the California Department of Financial Protection and Innovation ceased operations of Silicon Valley Bank (SVB), which had typically assisted startups in a variety of innovation-sector companies.

The reasons for the shutdown are still being uncovered, but the announcement sent shockwaves across the sector, especially because Dollar Coin issuer Circle had more than $3.3 billion of its $40 billion holdings in the bank.

Signature Bank, which also provides services to bitcoin companies, suffered a similar fate on March 12.

After clients withdrew cash from SVB and Signature, the New York Department of Financial Services seized the banks to avoid other bank runs.

The shutdown of SVB was especially detrimental since the USDC stablecoin momentarily lost its $1 peg due to significant uncertainty on the impact Circle’s exposure would have on its capacity to handle redemptions.

When Circle CEO Jeremy Allaire stated that the stablecoin issuer has secured new financial partners in the United States, the USDC peg crept back up to $1.

In light of the turmoil of the previous few days, the cryptocurrency ecosystem is examining its relationships with conventional financial institutions that facilitate fiat currency deposits, withdrawals, and monetary movements.

The chief executive officer of Coinbase, Brian Armstrong, said on March 13 via Twitter that the US cryptocurrency exchange has previously studied capabilities that may circumvent or bridge holes uncovered by the most recent conventional banking failure.

The chief strategy officer of cryptocurrency insurance company Evertas, Ryan Lackey, inquired as to whether the exchange had explored providing neo-banking services to high-net-worth individuals and organizations.

Armstrong said that Coinbase would need to add a variety of features and opened the forum to further discussion:

“Definitely something we’ve thought about. Need a few more features like outbound wires, multi-user support etc. Non-fractional reserve “banking” is definitely looking more attractive right now.”

Coinbase announced on March 10 that it had around $240 million held at Signature Bank, although it intends to retrieve the entire amount.

During the weekend, worries of widespread runs on smaller banks throughout the United States were prompted by the collapse of SVB and Signature Bank.

According to a Bloomberg story, the Federal Reserve and the Federal Deposit Insurance Corporation are exploring the formation of a fund to safeguard deposits at failing banks.