Cathie Wood sees digital assets as insurance against the next mistakes of regulators

​ARK Invest CEO says it is unacceptable to deny US citizens access to cryptocurrencies

23.03.2023 - 13:00

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4 min

What’s new? Cathie Wood, CEO of investment firm ARK Invest, has spoken out on the banking crisis and the tightening of the US financial regulators’ actions. Wood believes that authorities should not deny American citizens access to crypto assets, which she sees as “insurance” born in the 2008-09 global financial crisis.” According to the entrepreneur, digital assets can act as protection against possible next political mistakes by the Federal Reserve System and other regulators that threaten the well-being of citizens.

How does Wood view the market situation? The head of ARK Invest stressed that bitcoin and other crypto assets rose in value during the banking crisis because, unlike traditional financial institutions, they have no central points of failure, and are decentralized, transparent, and auditable.

Wood believes that amid the low-interest rates on the long-term assets that banks bought during the coronavirus crisis, they are now borrowing at ~4,5% to cover deposit outflows. These actions result in net interest losses and lower profits, undermining banks’ capital and jeopardizing their future.

“Given this negative feedback loop, why will deposits flow back to regional banks? If they do not, then M2 growth is likely to accelerate further into negative territory for the first time since the 1930’s, putting significant stress on both commercial and residential real estate,” Wood summarized.

Earlier, Wood also criticized the actions of regulators, which could be aimed at suppressing legal crypto activity in the United States. She noted that the crisis was caused by mistakes of the authorities, but not cryptocurrencies, which in the current situation have played the role of a “safe haven.”

Situation in the banking sector. In March, three major US banks dealing with cryptocurrencies, Silvergate, Silicon Valley Bank (SVB), and Signature, announced bankruptcy. Regulators said that the deposits would be recovered without taxpayer funds. However, Circle CEO Jeremy Allaire believes the risks to the banking system continue despite efforts by authorities.

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Earlier, Circle and Coinbase accused banks of destabilizing the industry, saying that it is the traditional sector that poses a threat to cryptocurrencies, not the other way around. In addition, the banking crisis led US crypto companies to open accounts in Swiss banks and offshore jurisdictions.

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