I am a long time crypto skeptic. Not that I don’t think the underlying technology does what it claims to do. It’s just that as an engineer (by vocation and avocation) I just don’t see a use case for cryptocurrencies other than money laundering.
A key piece of money laundering involves “on ramps” and “off ramps”. How to get the money into crypto, then how to get it back out and into the regulated banking system. Banks, or probably more correctly banking regulators, don’t want money from anonymous sources sloshing into and out of banks, for all the usual reasons.
I recently read Michael Lewis’s book Going Infinite about Sam Bankman-Fried and the collapse of FTX, mostly because I like Michael Lewis and though he could clear up the murky financial situation at FTX for me. I recommend the book but kept thinking of one very small comment. He implies that the recent failure of Silicon Valley Bank (SVB) was tied to crypto. I was, and still am intrigued.
Googling anything about crypto is all but useless, but I did come to the conclusion that there was something of a run on SVB to cover crypto losses on other platforms. This makes sense. It’s hard to blame cryptocurrencies directly, and it’s hard to imagine what to do about such a situation.
it also occurred to me that FTX was using its internal hedge fund (slush fund?) Alameda as a stealth on ramp / off ramp for their crypto products. This was in a way similar to how Silicon Valley Crypto Bros were using SVB as a sort of stealth on ramp / off ramp into the legitimate banking system. When crypto crashed there was a run on the regulated part of the banking system that provided the ramps to prop up the crypto losses. There is lots more to all of this, but I am beginning to understand the problems of linking unregulated cryptocurrency to the regulated banking system.
Steven A. Guccione 