Cryptocurrency has seen a significant drying up of liquidity due to the lack of a crypto bank settlement layer. Without a bank-like clearinghouse infrastructure, traders in the crypto market are forced to take on a certain amount of counterparty and settlement risk when trading. This leaves them with the difficulty of finding counterparties and executing trades.

According to Ram Ahluwalia, the CEO of PeerNova, the resolution of this problem lies in the emergence of crypto-friendly banks such as Signet and Silvergate Capital Corp. These solutions provide a reliable settlement layer that allows traders to settle instantly with counterparties without taking on any counterparty or settlement risk. This helps to improve market stability and facilitates efficient trading.

Ahluwalia also raises the potential of relying solely on a secure high transaction per second (TPS) blockchain for settlement rather than a banking layer. However, with the lack of a centralized clearinghouse, this could lead to the addition of additional risk to traders as they attempt to comply with international sanctions laws issued by organizations such as the Office of Foreign Assets Control (OFAC).

In conclusion, the installation of a crypto bank settlement layer has been identified as a major factor in improving market liquidity and security. The industry is shifting towards solutions such as Signet and Silvergate Capital Corp that provide faster and more efficient settlements than traditional clearinghouses. The security of these solutions has yet to be tested, but the associated risk with not having a reliable source of settlement has been demonstrated. Thus, it is clear that the emergence of reliable bank settlement layers will be key in unlocking liquidity and market stability in the crypto market.



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