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Caitlin Long is the Founder and CEO of Custodia bank. In this interview, we discuss the events that have led to three banking failures within a week, one of which saw the biggest bank run on record. We talk about anti-crypto coordination involving the US government, the inherent instability of the traditional finance system and how this is another signal that the game is up.
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TIMESTAMPS:
00:00:00 Introduction
00:01:02 Silvergate
00:06:38 Silicon Valley Bank (SVB)
00:14:28 How should banks make money?
00:21:28 SVB’s wild strategy; Dodd-Frank fail?
00:33:55 Narrow banks & speedy banks
00:41:08 Fed vs banks; nationalising banks
00:45:36 Signature
00:49:31 QE infinity
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****
“The Fed’s going to end up having to expand its balance sheet again, to proverbially print money, in order to provide the extra cash for the banks to be able to meet the demand deposit withdrawal; the banks should have been sitting on that cash all along.”
— Caitlin Long
Caitlin Long is the Founder and CEO of Custodia bank. In this interview, we discuss the events that have led to three banking failures within a week, one of which saw the biggest bank run on record. We talk about anti-crypto coordination involving the US government, the inherent instability of the traditional finance system and how this is another signal that the game is up.
– – – –
As the saying goes, to lose one bank may be regarded as a misfortune, to lose two banks looks like carelessness. How should we regard the loss of three banks within a week? To the uninitiated, this may look like a contagion, but it’s the impacts of two different systemic problems affecting two different markets: crypto and fiat. What it lays bare is the hypocrisy and instability of the traditional financial system.
The failures of Silvergate and Signature are rooted in the 2022 implosion in crypto. Precipitated by the collapse of Luna, we all know what followed: a nest of over-leveraged, hypothecated and fraudulent investments that fell like a house of cards. Who knows when it will end. Regardless, more recent failures seem to have been expedited by coordinated government action.
The obvious signal from the levers of power is that crypto is bad, and traditional finance is good. But what should have been an opportunity for the government to present the perceived weaknesses within digital asset markets, was significantly undercut by the biggest bank run in history: Silicon Valley Bank’s customers were withdrawing more than $1 million per second for 10 hours straight a little over a week ago.
The sorry mess is actually a clear vindication of Bitcoiners’ assertions that both crypto and fiat are both fundamentally unstable. The search for yield is endemic. The management of risk is too often criminally deficient. The argument is that narrow banking (full reserve banking) will suck deposits from risky banks, making risky banks even riskier, increasing systemic risk.
However, the system is becoming increasingly dysfunctional. Moral hazard seems endemic. Increasingly large bailouts are being used to keep the game going. The aim is to maintain the illusion that the financial system is stable. It is anything but, and everyone knows it. We’re entering a period on unknown risks. The time to change the rules of the game has long passed….(read more)
LEARN MORE ABOUT: Bank Failures
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Bank Runs, Bailouts & Bitcoin with Caitlin Long
Bank runs, or the sudden mass withdrawal of deposits from a bank due to rumors or lack of confidence, have been a recurring event throughout history. The first recorded bank run occurred in 1636 in Sweden, and since then, there have been numerous examples of bank runs worldwide. The advent of the modern banking system has provided a certain degree of confidence to bank depositors, but these runs still occur, especially during times of financial crisis.
Banks that experience a bank run can potentially face insolvency if they are unable to meet the withdrawal demands of their customers. In such cases, central banks can step in and provide a bailout by injecting liquidity into the troubled bank. This is essentially a form of insurance for the depositors, who may have lost their savings had the bank gone bankrupt. However, bailouts also have negative side effects, such as moral hazard and the creation of “zombie” banks that are kept alive by constant bailouts.
However, there is an alternative to traditional banking and bailouts that is gaining popularity: Bitcoin. Bitcoin is a decentralized digital currency that is not tied to any central authority or government. It is based on blockchain technology, which makes it resistant to fraud and manipulation. Bitcoin holders are in complete control of their money, and there is no need for central authorities to bail out banks or manipulate the money supply.
Caitlin Long is a well-known advocate for Bitcoin and blockchain technology. She is the founder of Avanti Financial Group, which is a digital asset bank that aims to provide a secure and compliant platform for institutional investors to manage their assets. Long believes that Bitcoin can provide a more stable and secure financial system compared to traditional banking.
In an interview, Long explained that Bitcoin can prevent bank runs by providing a safe haven for depositors. Since Bitcoin is not tied to any central authority, there is no need to worry about bank runs or bailouts. Long believes that Bitcoin can serve as a store of value that can protect individuals from the negative effects of inflation and government intervention in the financial system.
Moreover, Long stated that Bitcoin can provide an alternative to traditional banking services, which are often laden with fees, restrictions, and regulations. Bitcoin allows individuals to transact securely and directly, without the need for intermediaries. Long believes that Bitcoin can democratize the financial system and bring economic freedom to people who are currently underbanked or unbanked.
In conclusion, bank runs and bailouts have been recurring events throughout history, and they have negative effects on individuals and the economy. Bitcoin provides an alternative to traditional banking and can prevent bank runs by providing a safe haven for depositors. Caitlin Long is a prominent advocate for Bitcoin and believes that it can provide a more stable and secure financial system compared to traditional banking. As the world becomes more digitized, Bitcoin and other digital assets will continue to gain prominence and change the way we think about money and finance.
They're imaging a world where cash is still physical. Once the Fed takes over completely, we'll all be on digital allowances.
Fk she's good…
so much water
I lost over $40K when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I find one source to recover my money, at least $9k profits weekly. Thanks so much Mrs Ann Elizabeth Messer.
honesty and sincerity ! thank you.
What was the book she suggested called?
So?
Do not go and have a stupid tatoo, Caitlin, they are toxic, ugly and part of the transhumanist agenda.
New here so don’t know the boilerplate conversations, but hopefully it is frequently said on this channel that no one, and I’d add, especially no government (where it obviously focuses too much power into the hands of a few and is guaranteed to attract the most ethically questionable people), should be able to make up currency, loan it, and call it money, this process should always be considered counterfeiting! While the statements made here make sense, they beg the question, do we need to figure out how to make in inherently corrupt/unethical system work? Basically, Caitlin says here that the problem is “responsibility,” and of course she’s right and wouldn’t it pretty accurate to say that our society is built on a flight from responsibility from the ground up!? We don’t want the responsibility of earning, holding, and protecting our own wealth (or of many other things). We’ve become push overs for those who come along and say “I’ll be responsible for you” and “regulation” which is a fraudulent process because it attracts those who are either way over-confident in their ability to maintain their morality, or who’ve already discovered and made use and lucrative peace with their iffy conscience.
Excellent episode
This sounds a lot like what happened in Cypress, when they took depositors money in order to make the banks solvent again. I believe they call those "BAIL INS".
It's all chit chat at first and then he asks what the heck is going on in banking and Long flipped like a switch. She into full laser mode. *clears throat "Well look…." she's awesome.
The 12 regional Federal Reserve Banks, which are located throughout the country, are quasi-public institutions that are organized similarly to private corporations. The regional Federal Reserve Banks are not owned by commercial banks (like caitlin is saying), they are quasi-public institutions that are organized similarly to private corporations, but their ownership structure is unique.The regional reserve banks are overseen by a board of directors, which is made up of representatives from the banking industry, as well as representatives from other sectors of the economy. However, the ultimate decision-making authority for the Federal Reserve System lies with the Board of Governors, which is a federal agency.
caitlin is really cute. I wonder if she is single…?
Def need a part 2 if not a part 3, lots to unpack
When bankers came into crypto they used the same banking tactics. Lending out your assets without collateral to create yield.
Love her!
@41:25 it’s foolish to claim that we can’t have a safer product to offer depositors because they might use it too much. this is a strong indictment of the current system as being rigged against depositors.
Excellant show! Caitlin is right on top of it! Sadly though, I think where her story fails is in seeking remedy for overreach in the judicial system. Our judicial system has become more and more politicized for decades, to the point that now you MAY find justice, provided the federal gov't isn't a defendant. They will certainly weaponize in her case, and any that seeks to bring down "the establishment" and/or take control from "the establishment". And truth be told, even if you are successful in suing the government, I really don't think they care. The people responsible won't feel the pain. The little people will foot the bill for their abhorent behavior/activities, like we do for everything else. And thus the problem continues to roll down hill. As long as they get to remain in power, that's all they care about.
Love her!
Too much chick-chat.
Peter.. thanks.. Caitlin is awesome.. She speaks a little faster than most of the country girls I know.. but I managed to keep up with most of it.. (Dont push the tatoo thing.. that is impolite., unless bitcoin hits $1M before Miami). .One thing occured to me whilst you were discussing the safety of your business's bank demand deposits (eg for payroll). How much do you trust Tether? I think Paulo Arduino has said T is all backed by short term t-bills. so there is no duration risk (like SVP). Why not keep some of you demand deposits in tether.? The only counter to that I can come with is the blockchains that tether runs on.. Wouldn't it be great if BIP300/301 was activated and we could peg tether into Bitcoin. IT really could be our cyber bank then.
She was on fire. You could hear her excitement the entire time!
I love the idea of full reserve bank and I am in support of having that option. But this discussion would be more comprehensive if we don’t discount the benefit(s) of fractional reserve bank. Loans are still needed and controlled money printing keeps capital efficiency high + stimulate economy . Caitlin is right, we should be given both options.
All banks should be 100% reserve? This is totally ridiculous. The market should decide what type of banking is there
WELL DONE CAITLIN !
Just curious isn't robinhood a brokerage which is covered up to 250k on cash and 250k on securities. I thought they made $ on paid to order flow and front running trades not taking risk.