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- Xuan Changneng, Deputy Governor at the People’s Bank of China blames the US failure to contain fraud and risks in the crypto space on the banking crisis.
- China Vice Finance Minister Liao Min has called on cooperation among countries to implement crypto regulation.
Recently, Silicon Valley Bank (SVB) became the largest bank failure in US history after the 2008 failure of Washington Mutual. Regulators were reportedly left with no option but to close down the bank after the depositors rushed to withdraw funds at once. Another bank with more than $110 billion in assets, Signature Bank became the third largest bank failure in US history.
The collapse of SVB has been associated with the sharp rise of interest rates last year. According to reports, the bank had been enjoying “zero money” interest rates as billions of dollars flooded into SVB through tech venture capital. The bank reportedly put money in long-term US treasury bonds for some kind of return. However, the rising interest rate forced the bank to sell some of those bonds at a loss. This caused panic and fear among investors, triggering classic bank runs. SVB materialized in just 36 hours according to reports.
An official of the Chinese central bank People’s Bank of China (PBOC) has, however, linked the banking crisis to the country’s failure to regulate the crypto industry.
PBOC deputy governor calls for stricter regulation following SVB collapse
Speaking at the Boao Forum, Xuan Changneng, Deputy Governor at the People’s Bank of China said that risks and fraud in the crypto industry are the main cause for the collapse of SVB and Signature Bank.
Risks and fraud associated with cryptocurrency, including the two American banks who ran into troubles after providing many services for cryptocurrency from taking deposits to settlement, showed that regulators should respect rules when innovating regulation.
According to Changneng, it is important to ensure financial stability by upgrading “regulation philosophy, technology, and capability.” This can help adopt financial innovation without affecting financial stability. Even though he did not name any US lender, Bloomberg reports that he was referring to crypto-friendly Silvergate, Signature Bank, and Silicon Valley Bank. It is also reported that the banks failed because regulators refused to have deep discussions.
It can be recalled that the PBOC in 2017 made Initial Coin Offerings illegal and also restricted crypto trading. China Vice Finance Minister Liao Min has stated that China needs to coordinate and cooperate with other countries to achieve a common standard for the crypto industry. Li Bo, deputy managing director at the International Monetary Fund has also called on central banks across the globe to improve efficiency in cross-border payments by digitizing their reserves.
Crypto firms turn to Swiss banks for support
The collapse of these crypto-friendly banks has made crypto firms turn to Swiss banks for support. Sygnum is one of the biggest Swiss banks and has confirmed the influx of inquiries from crypto companies.
Dominic Castley, chief marketing officer at Sygnum said:
Over the past weeks as the current banking industry events have unfolded, we have seen a significant increase in onboarding enquiries from various international locations. Interest is mainly coming from investors, asset managers, and blockchain projects looking to diversify their crypto investments with a trusted Swiss partner like Sygnum Bank.
Also, Switzerland is said to offer clearer regulations compared to the US. Thierry Arys Ruiz, CEO of Swiss-based blockchain firm AgAu.io confirms that the country is indeed stable, and provides “more certainty to what the rules are.”
