Macroeconomic tensions grew this week with a fresh quarter-point rate by the U.S Federal Reserve, which was followed by other central banks and fueled expectations issuers in Latin America will do the same.
The string of rate hikes to curb inflation has been cited as a factor behind the bankruptcies of SVB, Silvergate Bank and Signature Bank, and Switzerland’s bailout of Credit Suisse.
Notwithstanding the damage to investor confidence and a slump in bank stocks, cryptocurrencies extended this year’s rebound: bitcoin, for example, is up more than 70% this year and gained a whopping 45% in the 12 days following SVB’s downfall.
“Digital assets have the potential to gain prominence amid the shocks the traditional financial system has suffered,” Max Krupyshev, CEO and co-founder of CoinsPaid, a cryptocurrency services platform and wallet, said in a news release.
While, on the one hand, cryptocurrencies are expected to take a larger role as a means of payment, investors are looking to these assets as a place to park their capital and fulfill an exchange function, in a decentralized way removed from the traditional financial system.
“The digital economy aims to give more autonomy to users and people, with skepticism towards traditional banks,” Krupyshev said.
Nevertheless, the absence of crypto regulation continues to be the industry’s key vulnerability, inasmuch as it limits the interest of bank and fintech customers. “When we look at the increasing number of uses and people joining cryptocurrencies, it reinforces the potential of this market as a whole and brings to light the need for regulation,” Krupyshev notes.