- The collapse of First Republic Bank undermines the narrative that crypto is to blame.
- Earlier, a string of banking collapses caused concern over global financial stability.
- Crypto supporters are arguing for a decentralized alternative to the banking system.
A recent string of banking failures has sent shockwaves through the global financial system.
First Republic Bank is the latest financial institution to fall. Its collapse reignited the heated debate surrounding the stability of traditional banking compared to crypto.
JP Morgan Bails Out First Republic
Major investment bank JP Morgan stepped in to acquire the struggling First Republic Bank on Monday, May 1.
The acquisition came after the San Francisco-based lender experienced a 75% drop in its share price and $100 billion in deposit outflows.
The First Republic collapse will leave the Federal Deposit Insurance Corporation (FDIC) on the hook for $13 billion to secure user deposits.
The bank is just the latest among major financial institutions to fail in the US and across the globe.
First Republic Collapse Shifts the Blame from Crypto
Incidentally, the first US banks to collapse in 2022 were crypto-friendly, which led to some pointing fingers at the sector.
While experts claimed that crypto’s impact on the bank collapses was minimal, some media outlets still blamed crypto for their downfall.
First Republic’s demise is the latest example that points to flaws in that narrative. Unlike Signature Bank, Silvergate, and Silicon Valley Bank, First Republic had minimal exposure to crypto.
Crypto supporters quickly pointed out the flaws in the critics’ argument. For instance, Gemini’s Tyler Winklevoss sarcastically asked whether crypto was to blame for the latest collapse.
Other users joked about the relative stability of the crypto market compared to the banking system.
“New memecoin rugged,” said one user. “Just kidding, the image below is First Republic Bank $FRC. Down another 40% today and now -93% YTD”
In the meantime, Bitcoin maximalists used the opportunity to argue for the perceived benefits of Bitcoin over the traditional banking system. “Banks go down, BTC goes up,” one user wrote.
On the Flipside
- The collapse also prompted crypto supporters to argue for crypto as an alternative to the traditional financial system.
- Most depositors don’t have to worry about the collapses; the FDIC insures all deposits up to $250,000.
Why You Should Care
The narrative on crypto’s perceived volatility and danger to the financial system impacts regulation, especially in the US. If that narrative shifts, the industry can expect less punitive legislation.
Read more about crypto as the alternative to the traditional financial system:
Can Crypto Be the Answer to the U.S. Banking Crash as Bank Runs Continue?
Read about Ethereum’s surging adoption:
Ethereum Hits Record Number of Holders with 0.01+ ETH