Nic Carter voiced his suspicions that the recent U.S. banking crisis was a ruse to accelerate Central Bank Digital Currency (CBDC) adoption.
The General Partner at Castle Island Ventures said the weekend turmoil strengthened the case for CBDCs. Now “no one trusts” banks — CBDCs provide a solution by taking them out of the equation and having a direct link between people and the central bank.
“The political case for CBDCs became much, much stronger this weekend. the issue with CBDCs was always disintermediating commercial banks, but now that no one trusts commercial banks…“
It’s important to note that different CBDC models exist, including the “wholesale” model, which uses banking intermediaries.
Nonetheless, as further details of the banking crisis come out, including allegations of a deliberate ploy to smear cryptocurrency, Carter’s assessment holds more weight.
U.S. banking sector in turmoil
On March 9, Silvergate announced winding down its operations following liquidity issues. The “crypto-bank” said it was struggling amid a Q4 2022 surge in withdrawals — prompting the forced selling of assets at a loss to cover its withdrawal liabilities.
Silicon Valley Bank was taken over by the Federal Deposit Insurance Corporation (FDIC) on March 10, as the ailing tech lender was subject to a liquidity crisis from a spate of mass withdrawals.
The incident sparked discussion on how the U.S.’s 16th largest bank could become so exposed, especially as it remains well capitalized.
Likewise, New York regulators shut down Signature Bank on March 12, saying it was necessary to stop the banking crisis from spreading.
The Fed announced its Bank Term Funding Program (BTFP) in response to the crisis. The program will loan financial institutions the par value of assets held, thus ensuring the system is sufficiently liquid.
Anti-crypto message
Signature Bank board member and former U.S. representative Barney Frank told CNBC the bank faced no insolvency concerns and was arbitrarily seized. Frank put this down to regulators wanting to smear the crypto industry.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message.”
Adam Cochran, Partner at Cinneamhain Ventures, said it was worrying that FDIC protocols could be used to “screw over” Signature Bank shareholders.
Cochran spoke of political wrongdoing to push a hidden agenda. He called the actions a thinly veiled attempt to bully the crypto industry.
“Regulators try and bully the industry without letting it get to that because they know they can’t fight on a fair playing field.“
Chiming in, Bitcoin maximalist Jimmy Song said the BTFP effectively nationalizes the banking sector, making a CBDC the “natural progression” from here.
Critics argue that CBDCs have the potential for financial tyranny, such as dictating how and where money can be spent.
