Stablecoins are the solution to crypto’s banking problem, says exec
The collapse of banks like Silvergate has certainly affected cryptocurrency exchanges, but there are ways the industry can survive without the support of banks, an executive believes.
Crypto exchanges rely heavily on traditional banking systems for customer deposits, making them vulnerable to various banking issues, according to Bitstamp USA CEO and Global Commercial Officer Bobby Zagotta.
The executive believes that stablecoins – cryptocurrencies whose value is tied to fiat currencies or other assets – could be a solution to crypto’s banking problem.
“We are currently discussing how stablecoins can offer us an alternative to traditional banking,” Zagotta said in an interview with Cointelegraph on March 27. He added that stablecoins could potentially unlock new opportunities for the industry, allowing it to look at banking from a new perspective and to return to the origins and purpose of crypto, adding:
“One of the fundamental principles of our industry is to enable individuals to transact without relying on third-party institutions, so there are other opportunities that could be explored, such as the use of stablecoins to reduce frictions caused by the banking system.”
According to Zagotta, stablecoins offer many advantages such as faster and more cost-effective transactions, reduced dependence on banks and increased liquidity. “Depending on the regulations, it is possible that we will see continued development and integration of stablecoins within exchanges in the midst of the banking crisis,” the manager stated.
In the interview, Zagotta stressed that the crypto industry needs to figure out the factors that led regulators to step into Signature bank. It is necessary for the industry to ensure that crypto-friendly banks operate in a safe and sustainable way going forward. He also warned exchanges against creating more risk for customers by quickly moving customer funds around different US banks that may be stressed or at risk.
Related: Coinbase wants developers to build inflation-pegged ‘flatcoins’ on its new ‘Base’ network
According to the executive, Bitstamp currently has 15 banking partnerships globally, including US banks such as Customers Bank and MVB Bank, as well as European banks such as LHV Bank and Gorenjska Banka that can also process payments in USD. “We are also in talks with United Texas Bank, Western Alliance Bank, Axos Bank and Cross River Bank to ensure we maintain a robust network amid all this change,” Zagotta added.
While Bitstamp sees stablecoins as a potential solution to crypto’s banking problem, it’s worth noting that some major stablecoins like USD Coin (USDC) are not immune to banking problems themselves. USDC issuer Circle faced major problems in March due to its $3.3 billion exposure to the collapsed Silicon Valley Bank (SVB). The events caused the USDC to briefly lose its 1:1 link to the US dollar.
According to media reports, the banking crisis has subsided in recent weeks, but is nowhere near being over. According to José Manuel Campa, the head of the European Banking Authority, European banks have remained vulnerable following SVB’s demise and the subsequent bailout of Credit Suisse by UBS.
Blade: Unstable coins: Depegging, bank runs and other risks loom
