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Home » News » Crypto to Become the Banking Crisis Safety Net Says Animoca Brands’ Yat Siu

Crypto to Become the Banking Crisis Safety Net Says Animoca Brands’ Yat Siu

The Chairman of Animoca Brands, the largest blockchain investor in the Asian region believes the crypto market is a haven for investors looking for ways to hedge against crises in the traditional banking system. His comments come after the global financial sector was rocked by the Credit Suisse turmoil and the collapse of three banks in the United States.

Siu cites circumstances surrounding the collapse of the 16th largest bank in the US, Silicon Valley Bank, and the troubles that saw Credit Suisse taken over by its rival UBS. On other hand, he lauds the crypto market saying it “played out differently” amidst all the turmoil.

“If you take a look what happened recently with the whole development with Silicon Valley Bank, which was obviously shocking, and with Credit Suisse being taken over by UBS…actually the narrative was played out quite differently for crypto,” Siu said during the Web3 Investment Summit in Hong Kong via a video call link.

“It started to actually bifurcate as some people had predicted, which is that sort of future, let’s say, safety net,” Animoca chair added.

Nevertheless, the cryptocurrency market remains largely unregulated with agencies and lawmakers in the US still deliberating how to provide oversight in some sectors of the digital asset economy.

In 2022, the market suffered a major downturn due to the Federal Reserve’s persistent push to hike interest rates to combat inflation and the implosion of TerraUSD, an algorithmic stablecoin in May, and Sam Bankman-Fried’s FTX exchange company.

The market erased roughly 60% of its value in 2022 from the peak highs in November 2021 as investors sought stable investment options in bonds and treasury bills. Amid the global banking crisis, Bitcoin and Ethereum prices have been on a stable upward roll, stirring the “safety net” narrative.

Although the largest stablecoin, Tether (USDT) has been stable throughout the financial crises in US and Europe, the biggest gainers are Bitcoin and Ethereum. Previously, investors have sought refuge in stablecoins but that incident led to USDC losing its dollar peg and may have driven them to the two top cryptocurrencies.

At the time, Circle, the company that issues USDC confirmed a $3.3 billion exposure to the fallen Silicon Valley Bank. USDC recovered its dollar peg immediately after the US government and regulatory agencies assured depositors, they will be made whole.

The bellwether cryptocurrency surged to a nine-month high roughly at $28,200 on Monday towards the close of the session (Hong Kong time). Ethereum gained value to reach a seven-month high of nearly $1,800, according to data provided by CoinMarketCap.

In Switzerland, a crisis has been boiling in Credit Suisse as investors dump the bank’s shares following the Sunday news about its rival UBS taking over all the operations of the 167-year-old financial institution for $3 billion. The Swiss banking giant’s shares suffered another 60% slump on Monday as investors reacted to the news. Efforts by the government to save Credit Suisse did little to change the course of its downward trend.

Credit Suisse’s demise comes hot on the heels of the fall of three crypto-friendly banks in the US, starting with Silvergate Bank, Signature Bank, and the largest of the three; Silicon Valley Bank. The latter was a major intermediary between startups and venture capitalists with the main focus on lending services.

Bitcoin and Ethereum Standout As Crypto Store of Value Assets

Despite the world lamenting over the fall of three banks in the US and one leading financial institution in Switzerland, the crypto market remains relatively stable. In addition to showing resilience from the numerous shocks in the past couple of weeks, BTC and ETH rallied to nine and seven-month highs.

“In light of that, crypto and specifically bitcoin and ether become attractive alternative ways to store value without those particular traditional banking risks,” Siu in a written statement to Forbes.

Animoca’s chair believes the positive response from Bitcoin and Ethereum in a nerve-wracking traditional financial system, is not a coincidence. He reckons that this is a true picture of the influx of funds from fiat currencies to cryptocurrencies.

“These cryptocurrencies have made notable gains just as the banking crisis rose to prominence. It’s not a coincidence. I think what we’re seeing now is a flight of regular money to some cryptocurrencies,” his statement continued.

Siu assured investors that Animoca does not have exposure to the series of bank failures in the US and Credit Suisse. However, 380 of the firms within its investment portfolio “would be affected.”

The Chair of Animoca told Forbes that all the deposits belonging to these companies are safe and that the issue at hand was “not critical.” Animoca recently informed its investors that it has never banked with Silvergate Bank or Silicon Valley Bank.

Nevertheless, Animoca has not been operating under the rock and has been hit by the ongoing crypto winter. Most of the crypto tokens in its umbrella, including the Sandbox, have lost more than 90% from their previous peak highs during the crypto bull run in 2021.

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