Crypto banker Silvergate Capital is going out of business.

While Silvergate’s demise is a big deal, it changes nothing for cryptocurrency. Silvergate did not buy, sell, or own crypto (though it held some crypto for others).

Yes, some crypto businesses will need to find another way to get the specialized banking services that Silvergate provided, but the cryptocurrencies themselves will be fine.

The whole point of cryptocurrency is to move money without banks.

In fact, Silvergate transitioned to cryptocurrency precisely because it knew this technology would put it out of business. The pivot was designed to make money for long enough to ease into obsolescence.

Ironically, crypto did put Silvergate out of business—just not in the way anybody expected.

Time for a change

With Silvergate out of the picture, cryptocurrency has one less crutch to rely on as it crosses the chasm of adoption.

Already, miners and exchanges have closed their Silvergate accounts, settled outstanding debts, reclaimed their collateral, and moved their businesses elsewhere.

For the most part, they are not moving “on-chain.” Crypto infrastructure isn't ready to support large amounts of real-world business.

As more legacy entities fail, they create more urgency for crypto to fix that problem. These institutions connect businesses and speculators with crypto markets, but that doesn't move the technology forward.

I discussed this in my second book, Bitcoin or Bust: Wall Street’s Entry into Cryptocurrency. Crypto does not need any of the services that banks provide, but humans do.

You can expect savvy, forward-thinking businesses will offer the same services Silvergate did. There’s still a big need to fill (for a small fee).

Ditch the safety crutch

That’s not necessarily the best thing.

How can cryptocurrency succeed if it always depends on legacy technology?

Cryptocurrency can do everything the modern financial system can do. When we let legacy financial firms take over any of those functions, we give ourselves one less reason to create a crypto-native alternative.

Swimmers never realize their full potential until they’re forced to compete against each other. Children never learn to ride their bikes until their parents take the training wheels off (or, never put any on to begin with).

You'll never learn how to cook as long as somebody else always makes your dinner.

With each crypto business that fails, maybe Wall Street thinks twice about taking over the market. Maybe those profits and commissions are a little less enticing. Maybe regulators get a little more cautious and restrictive. Maybe pensions decide they don’t want to put 1% into crypto.

Maybe that gives our developers, entrepreneurs, engineers, and communities a little extra incentive to put in a little more effort, bring in some new brainpower, or perhaps go about their work with a greater sense of urgency and opportunity.

We need banks to stop making our dinners. Otherwise, we may never “eat their lunch.”

This post is also available as an NFT on Mirror.

Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio and connect with him on Superpeer.