Cryptocurrency the antidote to counterparty risk

Written by Stuart Griffin, Account Manager for Digital Assets at Superscript

Lenin once said: "There are decades where nothing happens; and there are weeks where decades happen." And what a week the banking sector had recently! Following the recent high-profile failure of multiple US banks, including Silicon Valley Bank (SVB), Silvergate and Signature, and with others seemingly straddling the precipice, counterparty risk has been highlighted as a major concern for business depositors. Raising the question: “Who and what can be trusted?” So, let's look at counterparty risk in the traditional banking system and how cryptocurrencies could offer an alternative for businesses when it comes to treasury management.

First, what is counterparty risk? This is the risk that a counterparty - the person or organisation on the other side of a financial transaction - will default on their obligations. In traditional banking, depositors face counterparty risk when they deposit their money into a bank account. The bank may lend out those funds, invest them, or use them for othe…