Ark Invest's Cathie Wood thinks some traditional banking norms will one day be replaced by a new technology.
On CNBC March 9, Last Call host Brian Sullivan said the current crisis at Silvergate Bank (SI) and Silicon Valley Bank (SIVB) is scary.
"Do you worry that there is a greater contagion risk from Silvergate and Silicon Valley Bank or do you think, again, it is kind of contained within those two?" Sullivan asked Wood.
"Certainly there was contagion last year," she said. "We often describe what happened last year as a crisis in crypto."
Wood said the crisis was proof of a concept.
"It was centralized, opaque institutions that failed," Wood said. "And some of that was because of fraud. If you looked at the blockchain technologies of Bitcoin blockchain and Ethereum, they really didn't skip a beat."
Wood acknowledged that their prices went down. She said that if one looked at the way they were processing transactions -- the smart contracts, the automated margin calls -- they worked fine.
"We think that it proved the concept that decentralized, transparent ecosystems are going to do much better, we think, than centralized institutions that are opaque," Wood explained. "And actually, in the case of these banks, maybe took on more risk that people didn't know about."
She suggested the world is moving toward a place where digital wallets will eventually replace some forms of traditional banking.
"Allowing users to transact on their smartphones, digital wallets are replacing cash and credit cards," Wood wrote in January. "They overtook cash as the top transaction method for offline commerce in 2020 and accounted for ~50% of global online commerce volume in 2021."
Wood also said she believes Silicon Valley Bank has similarities and differences with other banks.
"We look at the mismatch between their assets and liabilities," she said. "When money came gushing in during the covid crisis, with all of the stimulus money, Silicon Valley Bank put a lot of that to work in what, at the time, were high-yielding assets that averaged only 1.6 or 1.7 percent."
"Today, in order to attract and maintain deposits, you have to pay up," she continued. "And banks are not paying up, and they are all seeing their bank deposits go down."
Silvergate Bank, one of the few banks to embrace the crypto sphere, is out of business, suffering from its exposure to the numerous bankruptcies of crypto firms since last summer.
The company "announced its intent to wind down operations and voluntarily liquidate the bank in an orderly manner and in accordance with applicable regulatory processes," it said in a press release on March 8.
