For once, the crisis didn’t seem to revolve around a cryptocurrency company.
The sudden collapse of Silicon Valley Bank on Friday set off panic across the technology industry. But crypto executives and investors — who have endured a year of nearly constant upheaval — seized on the moment to preach and scold.
Centralized banking was to blame, crypto advocates said. Their vision of an alternate financial system, unmoored from big banks and other gatekeepers, was better. They argued that government regulators that recently cracked down on crypto firms had sown the seeds of the bank’s implosion.
“Fiat is fragile,” wrote bitcoin advocate Erik Voorhees, using a common shorthand for traditional currencies.
And the finger-pointing went in both directions. Some tech investors argued that the crypto world’s procession of bad actors and overnight collapses had conditioned people to panic at the first sign of trouble, setting the stage for the crisis at Silicon Valley Bank. In November, FTX, the crypto exchange run by Sam Bankman-Fried, went out of business after the crypto equivalent of a bank run exposed an enormous hole in its accounts.
The blame game is a sign of factionalism in the tech industry, where hot startups and trends come and go and crises can be used to advance agendas. As Silicon Valley Bank imploded, crypto advocates blamed the structures of the traditional finance system for sowing instability. Some venture investors blamed the social media panic that touched off the bank run. Others blamed the government for its economic policies, or the bank itself for poor management and worse communication.
The debate is unfolding after a tumultuous year for tech companies in which the crypto industry entered a monthslong meltdown and some of the largest Silicon Valley firms conducted mass layoffs.
Silicon Valley Bank started wobbling Wednesday, when it revealed it had lost nearly $2 billion and announced it would sell off assets to meet demand for withdrawals. The news set off fear in the tech industry as startups rushed to get their money out.
As often happens in bank runs, those concerns became a self-fulfilling prophecy. On Friday, the Federal Deposit Insurance Corp. announced it was taking control of Silicon Valley Bank, marking the largest bank failure since the 2008 financial crisis.
This article originally appeared in The New York Times.
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