Traditional banks rely on ‘tiny buffer’: Paris Blockchain Week 2023

May 26, 2023 | Helen Partz

The first day of Paris blockchain Technology week (PBW) brought deeper reflection on the continuing plight of bank management systems around the world, with industry executives comparing the failures of large digital currency companies such as FTX with those of banks such as SVB.

On March 22nd, PBW organized a group discussion called "FTX, Luna, Celsius,3AC: from Heroes to Zero", which brought together domain executives from blockchain technology venture capital firm Node Capital, data encryption-friendly Six Digital Exchange, Delta Growth Fund and data encryption liquidity service provider Woorton. Group discussion will be held at PBW's Mona Lisa on stage.

According to Zahreddine Touag, co-founder and head of trading of Woorton, the collapse of login passwords related to FTX and ℃ was caused by different main reasons, rather than exacerbating ongoing bank disasters.

"investors lack financial due diligence and participants lack risk control," Tuag said, referring to the collapse of FTX. He stressed that investors are generally not aware of the risk of owning encrypted assets and improperly feel that regulated service platforms are protected and are not vulnerable to losses.

If you are under control in France, you only have to do KYC and AML. When a person does KYC,AML, it can't protect you from damage at all. It won't do it at all. But in many countries, many people think that to be regulated is to be protected.

'There are many other problems, such as greed, especially among young and inexperienced investors, 'Mr. Tuag said. The executive says the spread of FTX and ℃ is not over, and professionals are still scanning each other to see who is affected. "A lot of people are affected, and no one knows. Therefore, in the following period of time, there will be more information.

Tuag shows that, unlike the collapse of login passwords, ongoing banking problems around the world are generally driven by the vulnerability of traditional banks in all their ways.

"some people are aware, but not everyone is aware that banks have a partial reserve system that makes them very sensitive," the Woolton executive said, adding that only about 12 per cent of the bank's money was liquid. He said:

They said he had trillions of dollars on his account, but he didn't. He's somewhere else. They were cast, it was in the market, but they didn't. Therefore, they rely on this subtle cache, 12%.

Mr Tuag adds that desperate banks such as SVB often rely on European and US jurisdictions, while relying on such "subtle caches" and anticipate that "no one will show up in the store and need money". According to Touag, the same is true of major banks such as Morgan Stanley or JPMorgan, but they have long been thought to be "too big to fail".

"that's what happened to SVB," Tuag said, adding that the Silvergate entertainment conundrum was "a little different." He made up a lie, and Signature's plight is another matter, because the bank is not closed. Tuag noted that the signature had just been taken over, and its enterprises adopted the signature in the morning of this discussion. He added:

In the data encryption banking system, the more suitable place to deposit in the bank is the signature. Why? Because regulators say they will make every depositor more detailed. As a result, we all know that our money is safe there; even if we go bankrupt, our money will be saved when we explore alternatives.

As reported, the New York State Financial Services Center took over the signature work on March 12th, with the specific Federal Deposit Insurance Corporation as the receiver. According to Barney Frank, a former lawmaker in the US House of Representatives, regulators acted against Signature without any bankruptcy.