In the short term, the successive failures of American banks have been great for crypto, but are we about to be running around like chickens with our heads cut off?

And if so… how long can a chicken survive without its head?

Apparently, 18 months is the record. But moving along, today, we’re going to dig into crypto’s relationship with banks to find out just how much we really need these things.

Cocka-doodle-doo!

Espresso Shots

☕️ First Republic Bank Teetering on Collapse 🏦 ❌

First Republic may be the latest to join the line of failed American banks, despite a potential $30 billion cash infusion.

First Republic has been teetering on the brink of a liquidity crisis since its shares fell 25% on Friday, and then a whopping 47% on Monday. Trading was so volatile that the stock was halted twice in one day.

This collapse happened despite the promise of $30 billion in deposits from the biggest American banks, like JP Morgan, Wells Fargo, and Bank of America.

CEO of JP Morgan Chase, Jamie Dimon, is now leading talks on how to rescue his competitor, but First Republic still seems a likely candidate for the next big bank run.

On the bright side, Dominos pizza has promised two large, one-topping pizzas to ex-employees of First Republic for their role in causing the latest domino to fall.

☕️ Crypto Mass Adoption in Africa 🌍 🪙

At the 2023 Blockchain Africa Conference in Johannesburg, mass adoption of bitcoin and stablecoins were high up on the docket.

The Central African Republic adopted Bitcoin as legal tender last year, but Marius Reitz, General Manager for Africa at crypto exchange, Luno, feels that the continent is poised for more widespread adoption in the coming years.

“You could start seeing a situation where neighboring countries also start to declare bitcoin as legal tender,” said Reitz. “Bitcoin could become a regional currency or it could even become a common currency across the African Union.”

And this seems all the more likely as much of Africa is already going digital.

“You’ve got a lot of nuances in the African financial stack,” said Maya Caddell, the chief of staff at Nestcoin, a Web3 startup.

“Not just between the West and Africa, but also between African markets. In Nigeria, people use bank transfers a lot. In Kenya, M-Pesa is king and dominates. In Ghana, it’s MTN’s Momo, which is MTN’s mobile money.”

The African tourism agency hopes that this will bring foreigners to Africa to conduct crypto business, rather than the favored pastime of hunting endangered animals.

☕️ The SEC Speaks Out Against… The SEC? 💰 🤺

SEC Commissioner Hester Peirce broke ranks with her boss, SEC Chairman Gary Gensler.

In a discussion with law students of Florida International University Peirce expressed “grave concerns about the number of things we’re trying to do at the same time.”

“Gensler has a tremendous amount of energy, and I think that’s reflected in a very busy regulatory agenda for the commission,” said Peirce.

In short, Peirce’s polite critique of her colleague communicated that she feels that there is so much American regulation planned for crypto, that little to none of it will actually get accomplished.

Peirce also concluded by admitting that she sees room for the United States to lead the way in crypto innovation and adoption.

“Some people in the regulatory world are perfectly fine with having innovation in crypto move away from the United State because they don’t think that there’s anything positive that’s going to come out of it,” said Peirce. “I tend to be of a different mindset.”

We took the liberty of removing the “Ah”s, “Stop it”s, and “Quit it”s from Hester Peirce’s quotes, as she was repeatedly elbowed in the ribs by two unnamed members of the SEC to get her to stop talking.

Spilling the Beans

Can Crypto Survive Without Banks? 😳

We’re in the midst of a polarizing situation.

Crypto, particularly Bitcoin, seems to be doing better and better as the American banking system undergoes catastrophic failure after failure.

But we have to ask ourselves; how long can one function without the other?

We’ve spoken with hushed tones and awed whispers about, “The Great Decoupling,” the day that Bitcoin will finally diverge from the stock market and the traditional financial systems to finally stand alone.

But could this be a premature decoupling? 

We've been wondering: Does the infrastructure to support Bitcoin exist without the support of crypto-friendly banks?

There are currently over 100,000 merchants and retailers that accept crypto as legal tender, but some of the largest and most renowned retailers are dragging their feet.

Walmart and Amazon for instance, don’t yet accept crypto for retail transactions.

A customer could circumvent this by using crypto to purchase gift cards, but when it comes to buying a floral-patterned shotgun for your wife or overnighting scented candles, fiat currency is still your best bet.

Obviously, we’re bullish on crypto.

It’s in the name, Coffee & Crypto. But still, even we would have to advice having all of your assets in cryptocurrency, you usually can't pay your rent in Bitcoin.

So what’s the solution when you have some of your finances in crypto and some in more traditional places? Well, crypto-friendly banks of course.

But “crypto-friendly” banks aren't doing all that well at the moment - and for that matter... neither are the other banks.

There are now a not insignificant amount of crypto companies that are looking for new banks. And the more structurally sound banks, have to wonder: is this really worth it?

As those banks look at debacles like Signature Bank, when in the wake of the collapse, CEO Joseph DePaolo received a heated, critical letter from Senator Elizabeth Warren.

The letter criticized DePaolo and Signature for “gross mismanagement that resulted in the bank’s failure” and repeatedly emphasized that Signature “embraced crypto customers with insufficient safeguards.”

Warren ended the letter with a question. “Why did you fail to adhere to regulators’ warnings about the risks associated with the crypto industry?”

Warren and several others in Washington haven't exactly been reading the tea leaves... First Republic Bank isn't a crypto Bank, neither was Silicon Valley Bank.

Banks aren't crashing because of crypto. Even so, why would any bank want to put up with the headache of angry regulators in the midst of a financial crisis?

Quite a few of those traditional banks have already decided, no, it’s not worth the risk.

Ohio-based KeyBank has said that it’s only taking on clients that meet a “moderate risk profile” and that “crypto-focused firms do not fall within this category at this time.”

A similar sentiment was echoed by Citizens Financial Group, who issued an official statement citing that the bank has no, “direct credit exposure to crypto/digital asset businesses, and it’s not something we’re looking to get into at this time.”

Banks are willing to take on clients who are involved in some crypto ventures, but they’re wary of dedicated crypto clientele because of the volatility associated with those kinds of investments.

The name of the game is Risk vs. Reward.

If you’re a struggling dive bar in a college town and your venue is suddenly packed five nights a week with some very young looking patrons, you’re presented with a dilemma.

There’s going to be a lot of money coming in from those mostly underage patrons, but you run the risk of being fined or even totally shut down for providing alcohol to minors.

So what’s the solution?

Crypto, like those metaphorical college students, needs a chance to grow up. It’s a young industry and that volatility is clearly the result of some growing pains.

Meanwhile, Banks have been around forever and they've had more than their fair share of horrific collapses.

Banks and their crypto counterparts, need to operate with a greater level of transparency to prevent the kind of financial catastrophes that have made headlines this past year.

Cohesion is the name of the game. Banks want the fortunes that crypto can provide, and crypto, for now, still needs the stability afforded by the old guard.

Bitcoin has the potential to make the needs for these banks redundant, but frankly, traditional financial institutions haven't made a Bitcoin-only world possible. Yet.

There may very well come a time when your local store would rather receive crypto than cash, it may even be coming sooner than we think.

If banks continue to fail and the dollar continues to weaken, Bitcoin may soon look very appealing to a whole lot of people who don't have the room to store gold bars.

But like all of the greatest symbiotic relationships in nature, crypto and banks still rely on each other.

That is, of course, until one of them gets big enough to destroy the other.

Meme of the Day

It's a bird... it's a plane... it's the great decoupling! 🚀

Crypto 101

M-Pesa: This is a new one for us too! M-Pesa is a mobile phone-based money transfer service and digital bank launched by Vodafone and Safaricom.

Though initially launched in Kenya, this service became wildly popular and spread throughout Egypt, South Africa and much of the African continent, as well as Afghanistan for some reason.

Think of M-Pesa as a hardier, world-trotting Venmo that has a savings account feature. The popularity of M-Pesa is one of the biggest reasons many believe Africa may be the next hub of crypto adoption.

The Last Sip

SEC Commissioner Hester Peirce politely feels that her colleague, SEC Chairman Gary Gensler, wants to do too much too quickly when it comes to crypto regulation.

But here’s our less polite list of things that we think Gary Gensler looks like:

1. A House Elf with tiny ears.

2. Benjamin-Button-Jeff-Bezos

3. If the Deep Sea Blobfish evolved to walk on two legs.

Stay Caffeinated,

Coffee & Crypto Team

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