Banking

The traditional financial system of depository institutions that accept deposits from the public, make loans, provide payment services, and in aggregate create the money supply through fractional reserve lending. Banks occupy the central position in the existing financial infrastructure that cryptocurrency was partly designed to circumvent, providing custody of funds, settlement of payments, and credit creation. The relationship between the crypto industry and banking has been fraught, with crypto companies repeatedly struggling to access and maintain banking relationships due to regulatory pressure, perceived risk, and ideological resistance from some bank compliance departments. Events like Operation Choke Point 2.0, Silvergate Bank's wind-down, and Silicon Valley Bank's collapse in March 2023 (which briefly depegged USDC due to Circle's $3.3 billion in deposits there) illustrated how dependent the crypto ecosystem remains on traditional banking infrastructure despite its stated goal of disintermediation. Example: Operation Choke Point 2.0 was a term coined by Nic Carter in 2022 to describe what crypto companies alleged was a coordinated effort by US banking regulators under the Biden administration to pressure banks into denying services to crypto businesses. Major crypto-friendly banks including Silvergate (which voluntarily wound down in March 2023) and Signature Bank (shut by regulators days after SVB's collapse) exited the market, leaving many crypto companies scrambling to maintain basic banking access. Why it matters for Web3: Banking relationships remain essential for crypto businesses to connect with fiat currency, pay employees, maintain treasuries, and service institutional clients. The cycles of banking access and denial have profoundly shaped which crypto companies can operate and where they choose to incorporate. The GENIUS Act's creation of regulated stablecoin pathways for banks may represent the most significant structural shift in the crypto-banking relationship since Bitcoin's creation.

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