#BNBATH900 The CEO of Custodia Bank warns that TradFi firms are facing the first crypto winter
Caitlin Long stated that the mismatches between traditional financial systems and blockchain protocols, which settle in real-time, could affect TradFi firms.
The CEO of Custodia Bank warns that TradFi firms are facing the first crypto winter
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Institutional investors in the world of traditional finance lack updated risk tolerance models to deal with cryptocurrencies and could face problems during the upcoming bear market, according to Caitlin Long, CEO of Custodia Bank.
"Big finance has come in strong, and that seems to be driving this cycle. I suspect it will continue to drive it," Long told CNBC at the Wyoming Blockchain Symposium on Friday.
Long noted that traditional financial institutions feel comfortable taking on large amounts of leverage due to the safety mechanisms built into the system, such as discount windows and other "fail tolerances".
Banks
Long shares her views at the Wyoming Blockchain Symposium. Source: CNBC
She warned, however, that these advantages disappear in the world of cryptocurrencies, where settlement occurs in real-time. The CEO said that the incompatibility between crypto and traditional systems could create a liquidity crisis for these institutions:
"Those fail tolerances are built into the system for historical reasons, where systems were not updated in real time. In cryptocurrencies, everything has to be in real time, and it's simply a different animal.
