Ah, mon ami, as the esteemed Erebor fills the void left by the fallen SVB, experts warn of potential risks in the integration of stablecoins with banking. Quelle horreur!
Stablecoins, those pesky digital currencies that refuse to fluctuate like their wild cousins, are increasingly integrating with traditional finance. This presents both opportunities and risks, as we witness the birth of a stablecoin-powered bank, Erebor, backed by the illustrious Palmer Luckey and the enigmatic Joe Lonsdale. Sacré bleu!
Mitchell Amador, the CEO of the blockchain security firm Immunefi, has shared his insights with crypto.news on this very topic. According to Monsieur Amador, the integration between banks and DeFi protocols carries several structural trade-offs. Banks will gain access to more functionality, but they will also become more exposed to risk. As they say, with great power comes great responsibility.
“This proposal to use stablecoins so ambitiously is actually very natural. And it’s probably going to be, at this rate, the future of fintech and banking more broadly. However, this approach carries risks. By exporting most of your underlying ledger and making your bank products widely interoperable with a broader financial ecosystem, you become reliant on that ecosystem — especially on stablecoin standards and the smart contracts behind them — and responsible for securing them,” Mitchell Amador, Immunefi.
Banks will have to learn DeFi security
Most banks rely on regulated and closed systems, such as SWIFT and Fedwire, for transfers. DeFi protocols, on the other hand, are controlled by third parties and rely on smart contracts that could have vulnerabilities. Quelle surprise!
“You also develop a very particular focus on crypto authentication and crypto security, especially in the context of treasury management. Not all banks will succeed in this endeavor. Consider that most exchanges are effectively stablecoin-based banks today, with one loose bridge out into the fiat world. That’s basically what is being proposed here as well,” Mitchell Amador, Immunefi.
In recent years, crypto firms have had issues getting access to banking services, as banks viewed the business as too risky. One bank, SVB, which regularly served crypto clients, collapsed in 2023 due to its reliance on U.S. Treasury yields. 😱
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2025-07-04 19:54