Conor Ryder, research analyst at Kaiko, claims that Europe has a chance to seize the opportunity and establish itself as a leader in the crypto industry as U.S. crypto enterprises look for alternatives to Silvergate and Signature Bank. The U.S. banking system is yet to declare that it is open for crypto business, leaving millions of dollars parked at Silvergate. This is causing crypto firms to consider Europe as an alternative, due to its regulatory clarity and easier fiat payment rails. The Markets in Crypto-Assets Act (MiCA) in Europe provides a stark contrast to the ambiguity in the U.S., where firms face new regulatory headwinds every day. This is creating a challenging environment for crypto organizations, making Europe an attractive option for new and existing market entrants.
The crypto industry is becoming increasingly less reliant on fiat currencies, as the percentage of market share of all volume on centralized exchanges for stablecoins just hit an all-time high. This is due to the Silvergate troubles last week, as investors prefer stablecoins to traditional fiat. U.S. policymakers are doing their best to suffocate dollar on-ramps into crypto, leaving the door wide open for the rest of the world to gain a competitive edge over the U.S. This shift away from fiat currencies is beneficial for investors, as it allows them to access more secure and reliable trading options. Stablecoins provide a safe and reliable way to trade, and their increasing popularity is a testament to their effectiveness.
The banking cutoff in the U.S. is having a direct impact on crypto investors, but not as much as it is on the businesses behind the platforms they use. Stablecoins are increasingly being used as a means of transacting, but the exchanges and other institutions that facilitate these transactions are the ones feeling the brunt of the USD cutoff. This could lead to U.S. exchanges only being able to serve customers during U.S. trading hours, and U.S.-based investment funds could miss out on trading strategies outside of these hours. The takeaway is that while crypto investors may feel the effects of the banking cut-off, it is the businesses behind the platforms that are feeling it the most.
The recent troubles with Silvergate Bank have caused a surge in the euro volumes for the BTC-EUR pair, hitting its highest market share against the U.S. dollar ever. This has raised the question of whether a U.S. bank will come forward and accept crypto deposits. With the consolidation of bigger banks in the banking sector, it is unlikely that any of the bigger banks will take on crypto deposits in the near future. This could mean that the trend of rising euro volumes could continue in the near future.
The banking industry is becoming increasingly oligopolistic, with larger banks dominating the market. Smaller banks are struggling to compete and attract new deposits. Many are hesitant to open their doors to crypto due to the example of Silvergate and Signature, who could not diversify their deposits enough to protect against a bank run. This presents an opportunity for Europe and the euro to gain relevance in the crypto industry, as smaller banks may be more willing to accept crypto deposits in the euro. With the right regulations and incentives, Europe could become a major player in the crypto banking sector.
