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The current crisis of the banking system in relation to cryptocurrencies is a complex issue that involves different perspectives. According to bbc.com, the 2007-2008 financial crisis, which began with the loss of value of real estate assets in the United States, caused recession and unemployment worldwide. The crisis was one of the biggest challenges that the banking system has ever faced.
Many attribute the crisis to the predominant financial capitalism model from the 1980s. The financial crisis led to the nationalization of banks, brought down governments, and generated very high unemployment rates. This historical context helps us understand the difficulties that the banking system currently faces.
According to cnnbrasil.com.br, there is no global banking crisis, but the financial system is under pressure. Credit Suisse, for example, was acquired by rival UBS after decades of mismanagement, scandals, and bad bets.
In addition, in the United States, the banking crisis began almost two weeks ago with the sudden collapses of Silicon Valley Bank and Signature Bank in a period of three days. This caused shockwaves in the global banking system. However, American monetary authorities decided not to raise interest rates to avoid increasing stress on the banking system, according to bbc.com.
Regional banks with profiles similar to SVB, including First Republic Bank, PacWest, and Western Alliance, oscillated downwards in the same week as the crisis of the others. Worried clients withdrew billions of dollars and injected them into larger, well-capitalized institutions.
To pay for the billion-dollar withdrawals, the old monetary strategy comes into play, as banks in crisis such as First Republic Bank were rescued with $70 billion by JP Morgan, and then another $30 billion from a consortium of 11 banks, organized by US regulators. This may not solve the problem, as First Republic's shares fell 33% on the stock market.
The other banks allegedly in crisis and under pressure were bailed out with $153 billion from the Fed, concluding the old monetary strategy for money to flow, banks to recapitalize, and attract investors who feel secure with the recapitalizations, and these banks to lend at slightly interesting rates.
Small and medium-sized banks becoming guinea pigs for the large banks and spinning their own money, the old game as always, but threatened in today's modern times.
To show the reflection of the alleged crisis and a pressure on banks, as in Brazil, for example, where the monetary system is robust and also protected by monetary policy, "the COVID-19 pandemic has increased pressure on the banking system, and the increase in delinquency is imminent," according to valor.globo.com. Many are now expecting a shock to the financial sector of similar magnitude to the 2008 crisis.
Global authorities launched an unprecedented coordinated effort to modernize the regulatory framework of the financial sector just over a decade ago, significantly raising the minimum requirements for the quality and quantity of banks' capital and liquidity, and managed to build a more resilient banking system, designed to keep reserves above the minimum that could be safely used under stress conditions. Although I never believed in such resilience of the monetary sector.
However, the COVID-19 pandemic is a different type of shock and the pressure on the banking system is growing in these modern times that threaten the hegemony of banks in the world.
And one of these threats is cryptocurrencies, which are an alternative to the traditional banking system, are created, maintained, and transferred through encryption technology, without the need for intermediaries such as banks. According to bbc.com, many consider that the 2007-2008 financial crisis represented the bankruptcy of the predominant financial capitalism model from the 1980s. In the opinion of some experts, cryptocurrencies represent an alternative to the traditional banking system, which was considered bankrupt.
However, cryptocurrencies are also under attack from manipulative media bought by some governments and their corrupt agents serving the current monetary system. Bitcoin, for example, experienced a drop of over 20% in a single day in April 2021. Furthermore, claiming that cryptocurrencies are often associated with illicit activities such as money laundering, terrorism financing, excessive electricity consumption, and ecological issues is meant to damage their reputation.
There are different perspectives on cryptocurrencies compared to the traditional banking system. Some experts believe that cryptocurrencies can offer a more efficient, secure, and democratic alternative to the traditional banking system, which is often associated with high fees and also corruption, market manipulation, and abuse of economic power, without hypocrisy.
