![]() ![]() Federal Reserve creating a new backstop facility reportedly worth $2 trillion, and Switzerland’s central bank bailing out Credit Suisse to the tune of $54 billion, the echoes of that prior crisis are loud.Īs the Fed and the Federal Deposit Insurance Commission scrambled last weekend to put a funding plan in place so that thousands of startups with deposits at Silicon Valley Bank would meet payroll this week, we got a flashback to Sept. Now, with the collapse of three high-profile banks, hundreds of regional banks facing worrying outflows, the U.S. It showed how Wall Street (and other financial centers) in effect, hold our democracies hostage. And it showed how the largest banks, whose interwoven credit exposures create “systemic risk,” exploited their “Too Big to Fail” status – the idea that governments would always bail them out to protect the economy – to place asymmetric, high-return risky bets. That crisis highlighted how our dependence on banks to run the plumbing of our money and payments leaves the entire economy vulnerable to mismatches in banks’ investments and liabilities, which can undermine their ability to honor deposits. 3, 2009, inscribing a headline from that day’s London Times: “Chancellor on the brink of second bailout for banks” (chancellor being the U.K.’s finance minister). Recall that the Bitcoin blockchain was born out of the chaos of the 2008-2009 financial crisis, with Satoshi Nakamoto’s immortal timestamp on Jan. With thousands of people next month joining CoinDesk’s annual Consensus conference in Austin, Texas, to discuss crypto’s challenges and opportunities, the community now has a narrow opportunity to seize the day and define the future of money. Subscribe to get the full newsletter here. You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. With crypto now embedded in public consciousness – negatively, mostly – the industry faces its biggest ever test, one that involves an intensified struggle with the financial establishment. and European banks will open people’s eyes to the leading cryptocurrency’s censorship-resistant, intermediary-free qualities.īut if this is bitcoin’s “Cyprus moment,” the context is very different from 2013. Again, bitcoin’s price has rallied on speculation that stress among U.S. ![]() Per Omkar Godbole’s reporting, I’m not alone in seeing parallels between the past week’s events. Local authorities had infuriated Cypriots by slapping a 10% tax on withdrawals, unwittingly encouraging some to warm to the idea of bankless digital money. Ten years ago, a strange new digital currency called bitcoin (BTC) caught my attention for the first time as its price surged during the Cyprus banking crisis. ![]() ![]()
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