Published 13 March 2023 at 18.03
Economics. The wave of bankruptcies among US crypto banks has caused many to question the merits of crypto – now that taxpayers are bailing out the banks' crypto-speculating customers. Wasn't the “advantage” of cryptocurrencies precisely that the government was not involved and that there is no counterparty risk?
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As US crypto banks now crash, the wealthiest depositors will not to lose a krone.
In fact, they will be protected not only by the American deposit guarantee of approx. 2.5 million Swedish kronor, which applies to ordinary bank customers, but also by a special crypto guarantee that was introduced yesterday by the US s government, which covers the entire loss – regardless of size.
It was therefore the treasury that had to finance the niche banks' failed crypto experiments in the end, anyway. Something that is now being criticized by analysts.
“The irony is that the same PR machinery that is now calling for the help of authorities, such as the FDIC (the agency that runs the US Deposit Insurance Corporation, FT's note) and the FED, only a few years ago also stood for the most lyrical descriptions of the possibilities with crypto,” writes one of them, Mikael Olsson, in Dagens Industri.
He continues:
“What blockchain- and cryptotechnology can achieve in the future is difficult to see, but central to the cryptofables of recent years has been a discrediting of precisely financial institutions and authorities. For example, the rescue efforts that took place in connection with the financial crisis in 2008 have been portrayed in this context as moral wretchedness”.
Exactly where the crash of the crypto banks will cost the US taxpayer is unclear. Formally, the support money is to be taken from fees at other – traditional – banks. But banks have a tendency to pass on costs to their customers, and whether everything can really be covered by increased bank fees remains to be seen.