Silvergate Shutdown and SVB Bank Run: What Web3 Startups Can Learn from Banking Mishaps

Time Stamp: March 12, 2023 10:04 PM
Source Node: 2513413

The recent banking mishaps involving Silvergate and SVB Bank have been a wake-up call for Web3 startups. These events have highlighted the importance of understanding the banking landscape and the risks associated with it.

Silvergate, a crypto-friendly bank, recently announced that it was shutting down its services to Web3 startups. This was due to increased scrutiny from regulators and the bank’s inability to meet the requirements of the new regulations. This has caused a lot of disruption for Web3 startups, as they have had to find alternative banking solutions.

The SVB Bank run is another example of how banking mishaps can affect Web3 startups. In this case, a large number of customers withdrew their funds from the bank due to concerns about its financial stability. This caused a liquidity crisis, which forced the bank to close its doors.

These events have highlighted the importance of understanding the banking landscape and the risks associated with it. Web3 startups need to be aware of the potential risks that come with banking relationships and take steps to mitigate them. This includes doing thorough due diligence on potential banking partners and understanding the regulatory environment in which they operate.

Additionally, Web3 startups should consider alternative banking solutions such as decentralized finance (DeFi) protocols. These protocols provide a more secure and transparent way to manage funds, as they are not subject to the same regulatory scrutiny as traditional banks.

Finally, Web3 startups should also consider using custodial services to store their funds. Custodial services provide an extra layer of security by storing funds in a secure, off-site location. This can help protect funds from potential banking mishaps.

Overall, the recent banking mishaps involving Silvergate and SVB Bank have been a wake-up call for Web3 startups. They need to be aware of the risks associated with banking relationships and take steps to mitigate them. By doing so, they can ensure that their funds are safe and secure.