Opportunity for Europe as US banks move away from crypto assets[Column]| coindesk JAPAN | Coindesk Japan

Europe may be able to turn this crisis into an opportunity as American crypto firms desperately seek alternatives to Silvergate and Signature banks.

There was a time when Europe struggled to catch up to the US in cryptocurrency innovation. Since the birth of crypto assets, stablecoins, trading volume and adoption, the United States has been considered the center.

Europe leads the way in regulatory clarity

But the longer it takes for American banks to open up to cryptocurrency companies, to accept the millions of dollars that were deposited in Silvergate Bank, the more regulation will become necessary. Crypto companies are more likely to choose a region like Europe, where clarity and fiat settlement are easier.

The regulatory clarity in Europe brought by the Markets in Crypto-Assets Act (MiCA) contrasts sharply with the ambiguity in the US, where businesses face new regulatory headwinds on a daily basis. ing. It is becoming an increasingly difficult environment for the organization of American crypto assets. For new entrants and existing participants, regional differences in regulatory clarity are a major point to consider.

Furthermore, US politicians appear to be doing everything in their power to stifle the influx of fiat money into crypto, creating a huge opportunity for the rest of the world to gain a competitive edge over the US.

When it comes to trading, the good news for investors is that they have become less and less dependent on fiat currencies in recent years. As Silvergate Bank went into crisis and investors chose stablecoins over fiat currencies, the share of stablecoins traded on centralized exchanges hit an all-time high. In the last year alone, stablecoins’ share of trading volume has grown from 79% to over 90%, making up the majority of exchanges’ trading volume.

Less reliance on fiat currencies means investors are less likely to be directly impacted by American banks’ “crypto-away”. However, while crypto investors are increasingly using stablecoins as a means of trading, platform companies are not. Those companies are the first to feel the damage of cuts from banks.

The lack of access to American banks means companies such as exchanges must approach the services they provide differently. For example, trading hours. Without access to a 24/7 dollar payment system, US exchanges may only offer services during US trading hours. In this case, US investment funds would also suffer the opportunity cost of missing out on after-hours trading strategies.

what the euro gets

Euro trading volumes show that negatives in one region are positives in another. The bitcoin (BTC) and euro trading pair rose in volume amid problems at Silvergate Bank, and early indicators suggest the euro could score a big win as U.S. banks move away from crypto assets. was The BTC/Euro trading pair has seen its share relative to the dollar rise from 7% in November to 21% most recently.

The question is whether American banks will welcome deposits from crypto companies. If the answer is no for the time being, the uptrend in euro volumes could continue.

Whether U.S. banks will aggressively acquire cryptocurrency companies as customers is a crucial but difficult question. Big banks currently have no incentive to take deposits from crypto companies. This is especially true at a time when large banks are consolidating in the banking sector.

Smaller banks, which are struggling to compete with big banks such as JPMorgan Chase & Co. in an increasingly oligopolistic market, need new deposits. In an ideal scenario, multiple smaller banks would open their doors to crypto companies, with deposits of crypto companies more evenly distributed across different banks, rather than concentrated in a few banks as in the past. It is desirable to

But smaller banks see Silvergate and Signature as examples of banks that failed to diversify their deposits to a level that would have prevented a run on some, and that banks are opening their doors to crypto companies. It will be some time before it appears.

That means Europe and the Euro have a great chance to gain relevance within the crypto industry.

Mr. Conor Ryder: Research analyst at Kaiko, a crypto asset data company.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Mufid Majnun/Unsplash
｜Original: US Banking Cutoff Presents Opportunities for Crypto in Europe