Binance CEO: Why Do The Same Banks Keep Falling?
In the wake of the Credit Suisse crisis, BinanceCEO Changpeng Zhao questioned ongoingbank failures and the regularbutcostly need to bail them out withtaxpayers'moneyinaMarch20tweet. Binance CEO Questions US Banking Crisis Banks are often portrayed as safe, but they are not immune to failure. This happens when they can no longer meet their obligations, theybreakoutwhen there isa bank run, as was thecase recently with Silicon Valley Bank (SVB). According to Binance CEO, these same banks failandtrigger a crisisthat leads to anexpensiverescue process, often using taxpayer money to maintain confidence in the financial system. Meanwhile, the CEO noted that it is extremelydifficult for new banks with better ideas to get approvalfrom the Federal Reserve, the centralbankofthe United States.
CZ's criticism underscores the need for innovation and competition in the banking sector. The difficulty for new banks to enter the market and the obligation to behave like failing banks are contrary to “free market”principles. It also prevents new and innovative ideas from entering the marketthat can lead to better customerservice.Her tweet came after the announcementofthemergerbetween Credit Suisse and UBS Group. The merger is expected to liquidatemorethan$17billioninadditionalTier1(AT1)bondsfrom Credit Suisse.
JP Morgan believes this would have a negative impact on investors and the financial market and warns that this could create contagion effects across the industry. According to JP Morgan, the cost of AT1 bonds is expected to increase exponentially at a double-digit rate.
The Federal Reserve Board of Governors refusedtolicenseCustody, a special purpose custodian(SPDI)inWyoming. Custodia is a crypto-friendly bank, and the Federal Reservesaid in its decisionthatcryptocurrencyactivityisinconsistent with bankingactivity.Therefore,custodycannot be regulated by the central bank. CryptocurrencyPrice Rally The recent collapse of Silicon Valley Bank has also raised concerns about the stabilityoftheUS banking system. However, while traditionalfinance is in a slump, the cryptocurrency market isbooming,andBitcoin's price hit a new nine-month high of $28,000 ahead of the Federal Reserve's Federal Open Market Committee (FOMC) meeting.The rally coincides with Binance'sannouncementthatitisliquidatingits $1 billion Industrial Recovery Fund and buyingbitcoin, among other things.
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