The growing graveyard of U.S. banks isn't a sign of broader collapse, according to Ram Ahluwalia, a former senior vice president at Bank of America and co-founder of Lumida, a digital assets investment advisor.

Rather, the banking sector has a “supervision framework” problem, he said. 

Silicon Valley Bank, Signature Bank, Silvergate Bank and First Republic Bank shuttered this year. Lumida’s research identified commonalities between the four banks – among them a high percentage of uninsured commercial deposits, rapid deposit growth and a significant held-to-maturity portfolio with unrealized losses. 

Crisis, Ahluwalia said, is too strong a word for the current state of banks. The megabanks aren’t at risk, unlike in 2008. 

“Banks are still lending to each other and none of the big banks are insolvent,” he said in a recent interview. “JP Morgan and other banks lent $30 billion dollars to First Republic Bank. We know which regional banks are not fine; we didn’t know that in 2008.”

While the problems with several regional banks isn’t a contagion threat to the economy as a whole there have been repercussions on crypto and web3. Silvergate Bank was a major component of a system allowing U.S. dollars to enter and exit the crypto world for trading; its failure left customers scrambling to find a new bank. Silicon Valley Bank’s failure led to a short-lived de-pegging of the stablecoin USDC when it was revealed that $3.3 billion in reserves backing the coin were held at the bank.

Read more: Texas Web3 Legislation Aims to Make the State the ‘Next Silicon Valley for the Digital Assets Industry’ 

In a broader sense, though, things are not close to what it was like leading up to the financial crisis. Unlike in 2008, the rate that banks pay each other to borrow funds overnight, known as Libor, isn’t high at the moment and trust between financial institutions is strong, Ahluwalia said. 

“Are there issues and lack of supervision by management? Could things have been different? Yes, but I wouldn’t call it a crisis.” 

The banks at risk have been identified and are taking actions to address the issues, particularly around commercial real estate, he said. 

“That’s the next shoe to drop because the banking failures we’ve seen today actually don’t have to do with commercial real estate,” he said. “It’s more of a slow-moving two or three-year issue, rather than an event happening, because there are many loans with different maturities.” 

Banks that have been most aggressive in commercial real estate in major metro areas such as New York City and downtown Los Angeles, as well as commercial real estate like shopping malls, have the most issues, according to Ahluwalia. 

He said the Federal Reserve does have a problem as it decides whether to further raise interest rates, which adds pressure on banks. In a rising interest rate environment assets that banks have sold – such as mortgages – at lower rates are worth less. 

The main question is how long will the Fed keep rates high. Ahluwalia advocates putting commercial real estate debt and other bank assets on-chain to create transparency, standardization and help make bank balance sheets more liquid. He believes tokenization will support banks long-term. 

Retail central bank digital currencies where the Federal Reserve opens accounts for clients and originates credit don’t make sense, he said. “That won’t happen because serious people understand that would mean you would have the Federal Reserve competing with banks,” he said. 

We need to invest in technology, he said, but in a sensitive way. 

“It is crazy to think two years ago, the Fed wire system went down,” he said. “You couldn’t do wires. Think about interest payments, obligations to make debt payments, paying rent and the accidental default issues.” 

“The mismatch between stable coin velocity, which is 24/7, and the Fed payment system, which is Monday through Friday, 8.00am-5.00pm, is a big problem,” he said.