Woorton co-founder Zahreddine Touag believes Signature Bank is the best place for crypto banking, even if it goes bankrupt.
The first day of Paris Blockchain Week (PBW) has prompted more thoughts on the ongoing crisis in the global banking system, with industry executives comparing the collapse of major cryptocurrency firms like FTX to the failure of banks like Silicon Valley Bank (SVB).
On March 22, PBW hosted a panel discussion titled “FTX, Luna, Celsius, 3AC: From Hero to Zero,” which brought together industry executives from blockchain venture capital firm Node Capital, crypto-friendly SIX Digital Exchange, Delta Growth Fund, and crypto liquidity provider Worton. The panel took place on PBW’s Mona Lisa Stage.
According to Zahreddine Touag, co-founder and head of trading at Woorton, the FTX and Celsius-related crypto industry crashes were triggered by different reasons than those that sparked the ongoing banking crisis.
“There was a lack of due diligence by investors and a lack of risk management by participants,” Touag said, referring to debacles like FTX. He noted that investors are often unaware of the risks of holding their crypto assets, mistakenly assuming that regulated platforms are immune to losses, stating:
"If you are regulated in France, you only have to do KYC and AML. When you do KYC, AML, it does not protect you from losing money. It does not at all. In many countries, many people think that being regulated is being protected."
Touag said there are many other reasons, such as greed, especially among young and inexperienced investors. According to the executive, the contagion with FTX and Celsius is still not over, and industry players are still looking at each other and wondering who will be affected. "A lot of people are affected and we don't know. So in the next few months, there will be more news," he said.
Touag said that unlike the cryptocurrency crash, the ongoing global banking problems are primarily driven by the fragility of the entire model of traditional banks.
“Some people know, but not everyone knows, that this fractional reserve system of the bank makes it very vulnerable,” the Worton executive said, adding that the bank only has about 12% liquidity.
"They say they have trillions on their books, but they don't. It's somewhere else. It's invested, it's in the market, but they don't own it. So they rely on this tiny buffer, 12%."
Touag added that troubled banks like SVB tend to rely on European and US jurisdictions, while relying on this "tiny buffer" and expecting "no one will suddenly show up at the store asking for money." According to Touag, the same is true for big banks like Morgan Stanley or JPMorgan Chase, but they have always been considered "too big to fail."
“That’s what happened at SVB,” Touag said, adding that Silvergate’s problems are “a little different.” He also argued that Signature’s crisis is “a different matter because the bank didn’t close.” Touag stressed that Signature had just been taken over and that his company used Signature this morning. He added:
“In the crypto banking system, the best bank is Signature. Why? Because the regulators say they will make every depositor whole. So we know our money is safe there, and even if they go bankrupt, our money is saved.”
As previously reported, the New York State Department of Financial Services took over Signature on March 12, appointing the FDIC as receiver. According to former U.S. House of Representatives member Barney Frank, the regulator took action against Signature without bankruptcy.
C3 Tip: The views, thoughts and opinions expressed here are the author's own and do not contain investment advice or recommendations. Every investment and transaction involves risk.
