CeFI V DeFi Debate and Blame Games begin amid SVB Implosion

CeFI V DeFi Debate and Blame Games begin amid SVB Implosion

The collapse of Silicon Valley Bank (SVB) sparked a blame game between the cryptocurrency and the technology industry. Throughout 2022, when the crypto winter was worsened by a string of bankruptcies and collapses apart, the crypto community was blamed by the tech and traditional finance industry. Now, crypto advocates are giving it back.

Decentralized vs Centralized banking

Proponents of the crypto industry say that the centralized banking system should be blamed in this scenario. Crypto’s bigger vision for an alternative financial system, unanchored to big banks and other financial gatekeepers, now seems a better option. 

Crypto advocates argue that lawmakers’ and regulators’ recent crackdown on the crypto industry had sown the seeds for Silicon Valley Bank’s implosion. Their constant scrutiny of the crypto industry made them blind towards the reoccurring signals for the collapse. 

Finger-pointing in both Direction

Reportedly, tech investors say that the recent turmoils of the crypto industry have made people susceptible to panic at the slightest sign of trouble. This attitude set the stage for the crisis at the Silicon Valley Bank. 

The FTX-saga, in which the exchange filed for bankruptcy on November 11, 2022, the crypto-friendly Silvergate Bank played a major role. It held accounts of FTX, Alameda Research and some of their top executives, which was supposedly used for moving investor’s funds internally.

The blame game does not stop here, as some blame the panic caused by social media for causing the bank run. While some kept blaming the government for the poor execution of their economic policies, and some blamed the SVB for bad management and poor internal and external communication. 

Such heated arguments and blame games are not new. These have become commonplace since last year, when the crypto industry was dotted with numerous collapses and bankruptcies, causing losses in trillions. Tech companies also suffered amid a slow economy, forcing many to cut jobs in huge numbers. 

What Caused SVB implosion

The Silicon Valley Bank was backed by bonds worth billions of dollars. To counter inflation, the Federal Reserve hiked interest rates, diminishing the rates of these bonds. SVB had to sell their bonds at a loss of nearly $2 billion. Bank officials tried selling assets to recoup the losses, but it was too late.

Source: SIVB; SimplyWallST

Source: https://www.thecoinrepublic.com/2023/03/12/cefi-v-defi-debate-and-blame-games-begin-amid-svb-implosion/