Statement from Custodia Bank on Recent Bank Failures
The unfortunate demise of Silvergate, Silicon Valley Bank, and Signature underscore the danger facing any fractional reserve bank when all its demand depositors come back to claim their money at the same time and the bank does not have adequate cash. The problem is not digital assets; it is that the risky business models and practices of these banks went unnoticed and unregulated until it was too late.
We hope that this moment will be a wakeup call for regulators. Technology and information are moving faster, and this is enabling faster and faster bank runs. But digital assets are not going away. As with the introduction of any new technology, there is an information gap in the market and unscrupulous actors will take advantage where they can.
The U.S. urgently needs to put in place safe business models for the banks that bank the fast-moving industries, like that proposed by Custodia, so that the Federal Reserve does not need to backstop such banks. Custodia proposed to hold $1.08 in cash for every dollar deposited by its customers.
Custodia
NMLS # 2129447
In certain US states, Custodia Bank, Inc. operates as Custodia Digital Services, Inc.
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