In his opinion, trading platforms face the same problems as traditional financial institutions

​Economist Nouriel Roubini predicts the extinction of crypto exchanges after the collapse of SVB

13.03.2023 - 12:45


3 min

What’s new? Popular American economist and bitcoin skeptic Nouriel Roubini, who predicted the 2008 global financial crisis, published a tweet in which he claimed the crypto industry’s impending systemic collapse amid the bankruptcy of Silicon Valley Bank (SVB). “Extinction ahead,” Roubini said, referring to the massive problems of the crypto ecosystem.

What is the economist’s prediction based on? According to Roubini, if a bank like SVB can go bankrupt in just one day, any exchange or financial scheme in the crypto industry would do it faster. The economist believes that trading platforms have the same problems as ordinary banks: massive maturity mismatches, shoddy assets, lack of liquidity and capital, deposit insurance, and lenders of last resort.

“So crypto system in on its way to systemic meltdown,” Roubini concluded.

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Situation in the banking sector. In March, two major banks at once, SVB and Signature Bank, declared bankruptcy. Later, the US regulators developed a plan to recover their depositors’ funds, with no provision for rescuing the institutions themselves.

Circle (the issuer of the USDC stablecoin) kept about $3,3 billion in SVB. As a result of the bank’s bankruptcy, USDC lost its peg to the dollar, and investors began exchanging the asset for other stablecoins. One user mistakenly exchanged over 2 million USDC for just 0,05 USDT.

On March 13, Circle CEO Jeremy Allaire said that 100% of USDC reserves are secure and the company will complete the transfer of the remaining SVB funds to BNY Mellon Bank.

After the bankruptcy of the FTX exchange, Roubini called cryptocurrencies the main Ponzi scheme and hinted that if the largest crypto exchange, Binance, has problems it will have no one to turn to for help. The economist also said that bitcoin could not become a real currency and states would switch en masse to central bank digital currencies (CBDCs).

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