• The fall of Silicon Valley Bank had a convenient deus ex machina to fix collateral damage.
• Crypto cannot expect the same, according to legal partners Jess Cheng and Amy Caiazza.
• There are important lessons for the crypto community to consider given recent banking system instabilities.
The Fall of Silicon Valley Bank
The fall of Silicon Valley Bank had a convenient deus ex machina to fix collateral damage. Despite headlines not revolving around crypto, there are important lessons for the crypto community to consider, especially as recent instabilities in the banking system have once again prompted cries that decentralized finance can solve many of the problems raised by traditional banking and incumbent financial systems.
Crypto Cannot Expect Same Help
Wilson Sonsini Goodrich & Rosati partners Jess Cheng and Amy Caiazza write that crypto cannot expect the same help from a deus ex machina as SVB did. In “Superman: The Movie”, our eponymous hero flies so quickly around the world that he turns back time and undoes a confluence of disastrous events where a nuclear missile detonated in the San Andreas Fault, showing how convenient it would be if such solutions were available for real-world situations as well.
Measures Taken by Treasury Department, Federal Reserve & FDIC
When it came to SVB’s closure, however, real-world measures needed to be taken by Treasury Department, Federal Reserve and FDIC on March 12th in order to “strengthen confidence in the U.S. banking system” following this dramatic closure.
Important Lessons for Crypto Community
Cheng and Caiazza explain why crypto cannot expect such help from a deus ex machina: though extraordinary measures were taken in this case, they suggest there is an important lesson here for all those involved with cryptocurrency; namely that a collapse within traditional banking does not necessarily make cryptocurrency any more trustworthy or reliable than it already was before this incident occurred.
Crypto users need to remain vigilant when using digital currency services and take necessary steps such as using strong passwords and two factor authentication (where available) in order to protect their accounts from cybercriminals or other malicious actors who may seek access without authorization or permission.