Gemini founder Tyler Winklevoss describes US banking system as unequal

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Gem­i­ni Exchange co-founder Tyler Win­klevoss described the US bank­ing sys­tem as a mod­ern-caste sys­tem where the peo­ple with the top banks are pro­tect­ed while the rest are exposed to risks.

In a March 17 Twit­ter thread, Win­klevoss cat­e­go­rized US bank cus­tomers into those banked by the bulge brack­et banks, region­al banks, and unbanked banks.

The Bulge banks are the finan­cial insti­tu­tions the US gov­ern­ment con­sid­ers Sys­tem­i­cal­ly Impor­tant Finan­cial Insti­tu­tions (SIFIs); in oth­er words, banks that are too big to fail.

Win­klevoss not­ed that cus­tomers with unin­sured deposits in these banks usu­al­ly don’t have to wor­ry because the gov­ern­ment will almost always come to their aid.

How­ev­er, those with unin­sured deposits in region­al banks are more at risk. Whether the gov­ern­ment will back­stop their deposits depends on the impact of such banks’ fail­ure on the greater bank­ing system.

Accord­ing to him, the deci­sion about the bank to save is deter­mined by the major­i­ty of the Fed­er­al Deposit Insur­ance Cor­po­ra­tion (FDIC) board, the Fed­er­al Reserves, the Trea­sury Sec­re­tary, and the Pres­i­dent. This means that banks that are not valu­able enough could be denied protection.

Win­klevoss added that “there is no guar­an­tee” for the customers.

For con­text, the gov­ern­ment had to step in to save Sil­i­con Val­ley Bank (SVB) cus­tomers because its fail­ure could have been dis­as­trous for the broad­er finan­cial landscape.

Mean­while, the third cat­e­go­ry is those with­out bank deposits, which are there­fore not eli­gi­ble for FDIC $250,000 min­i­mum deposit insur­ance. “This is not a lev­el play­ing field,” he concluded.

In a sep­a­rate tweet, Win­klevoss said:

“The US gov­ern­ment did a great job avert­ing a bank­ing cri­sis. Almost as great of a job as they did start­ing it.”

Mean­while, sev­er­al cryp­to com­mu­ni­ty mem­bers said Bit­coin (BTC) solves the prob­lem high­light­ed by Winklevoss.

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