The first day of Paris Blockchain Week (PBW) brought more about the ongoing crisis in the global banking system, with industry executives comparing the collapse of major cryptocurrency companies like FTX with the fall of banks like Silicon Valley Bank (SVB).
On March 22, PBW held a panel discussion titled “FTX, Luna, Celsius, 3AC: From Hero to Zero,” gathering industry executives from blockchain venture firm Node Capital, crypto-friendly SIX Digital Exchange, Delta Growth Fund and crypto liquidity . Woorton provider. The panel took place on the Mona Lisa PBW stage.
According to Woorton co-founder and head of trading Zahreddine Touag, FTX and Celsius-related meltdown in the crypto industry has been triggered by various reasons from the causes of the ongoing banking crisis.
“It’s a lack of due diligence from investors, a lack of risk management from players,” Touag said, referring to the collapse of FTX. He noted that investors often do not understand the risks of holding crypto assets, mistakenly thinking that regulated platforms are protected from losses, stating:
“If you are regulated in France, you only have to do KYC and AML. When you do KYC, AML, it does not protect you from losing money. Not at all. And in many countries, many people think that being regulated will protect you.
There are also many other reasons like greed, especially seen among young and inexperienced investors, Touag said. According to the execution, the contagion of FTX and Celsius is still not over and the industry players are still wondering who is affected or not. “Many are affected and we don’t know. So in the next few months, there will be more news,” he said.
Unlike the crypto collapse, the ongoing global banking crisis is mainly driven by the fragility of the entire traditional bank model, according to Touag.
“Some people know, but not everyone knows that this fractional reserve system with banks makes it very fragile,” said the Woorton executive, adding that banks only have about 12% of liquid funds. He said:
“The trillions that they say are in their books, they are not there. They are in other places. It is invested, it is in the market, but they do not have it. So they rely on this small buffer, 12%.
Touag added that troubled banks like SVB often rely on jurisdictions in Europe and the United States, while relying on these “small buffers” and expecting “no one to show up at the store asking for money.” According to Touag, it’s the same story with bigger banks like Morgan Stanley or JPMorgan, but people keep thinking they’re “too big to fail.”
related: FDIC sells Signature Bank deposits to Flagstar, crypto excluded
“That’s what happened with SVB,” Touag said, adding that the Silvergate issue was “a bit different.” He also said the Signature crisis was “another story, because the bank wasn’t shut down.” Touag confirmed that Signature was just taken and that his company was using Signature this morning. He added:
“In the crypto banking system, the best place for the bank is Signature. Why? Because the regulator said that they will make every single depositor whole. So know that our money is safe there, even if we go bankrupt, our money is saved.
As previously reported, the New York State Department of Financial Services took over Signature on March 12, appointing the FDIC as receiver. According to Barney Frank, a former member of the US House of Representatives, the regulator took action against Signature even though it was not insolvent.