The failure of First Republic Bank has revived the debate about traditional banking versus cryptocurrencies. This article discusses the fallout and the cryptocurrency discussion.
The global financial sector has been rocked by a recent spate of banking collapses. The most recent financial institution to fail is First Republic Bank. Its demise reopened the contentious discussion over how stable traditional banking is compared to cryptocurrencies.
JP Morgan Withdraws From First Republic
On May 1, a significant investment bank, JP Morgan, intervened to buy the faltering First Republic Bank.
The acquisition followed a 75% decline in the share price and a withdrawal of $100 billion in deposits by the San Francisco-based lender.
The Federal Deposit Insurance Corporation (FDIC) will be responsible for paying $13 billion to secure user deposits following the bankruptcy of First Republic.
The bank is only the most recent of several significant financial organizations to fail in the US and elsewhere.
First Republic Collapse Redirects Crypto’s Responsibility
In any case, some blamed the industry after the first US banks to fail in 2022 were crypto-friendly.
Although experts asserted that cryptocurrency had little effect on bank failures, some media outlets continued to attribute cryptocurrency to these institutions’ demise.
The collapse of the First Republic is the most recent illustration of the problems with that story. In contrast to Silicon Valley Bank, Silvergate, and Signature Bank, First Republic had little involvement with cryptocurrencies.
Critics’ arguments were swiftly refuted by crypto proponents. For instance, Tyler Winklevoss of Gemini mockingly questioned whether cryptocurrency was to blame for the most recent drop.
Other users made light of the cryptocurrency market’s relative stability in comparison to the banking system.
“New memecoin rugged,” one user said. “Just kidding, First Republic Bank’s stock symbol is $FRC. -93% YTD and another 40% down today.”
While this was going on, proponents of Bitcoin’s maximum supply took the chance to defend the cryptocurrency’s advantages over the conventional banking system. One person stated, “Banks go down, BTC goes up.”
On the other hand
- The collapse also gave cryptocurrency proponents ammunition to promote their technology as a viable alternative to the established financial system.
- The FDIC insures all savings up to $250,000, therefore the majority of depositors don’t have to worry about the bankruptcies.
Regulation is impacted, particularly in the US, by the narrative of cryptocurrency’s alleged volatility and threat to the financial system. If that story changes, the business can anticipate less harsh legislation.