Crypto’s biggest critics won’t back down

According to Diehl, the crypto industry is reinventing the financial catastrophes of the past. Crypto is like early days, he argues: specifically, the wildcat banking of the 19th century, when small banks outside of federal regulation in the US issued paper cash without enough gold or silver to back it. It made for an unstable system where a simple rumor about the lack of liquid assets could cause a run on the bank. Diehl pointed to stablecoins as an example of parallels with wildcat banking, referring specifically to the Terra Luna crash. The TerraUSD stablecoin promised to be a “safe and happy” way to bank a 20% yield, as long as the coin stayed pegged to the dollar. But it didn’t stay pegged, the value plummeted, and the project wiped out about $40 billion from the crypto market. The Wall Street Journal described the event as a “crypto bank run.” (Weeks after Diehl’s comment to Morning Brew, crypto lender Celsius also faced a bank run, “except there’s no bank,” as Fortune reported.)

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