What

Router Protocol is a Singapore-based blockchain infrastructure project that allows for cross-chain interoperability, powering cross-chain trading, swaps, and messaging. Founded in 2020, Router most recently raised a $4.1M Series A in 2021, with funding from investors like Shima Capital, Polygon US, and Gokul Rajaram.

Why

Ramani Ramachandran, Router’s Co-Founder and CEO, identifies crypto’s ascendance as a direct libertarian response to the 2008 financial crisis. Ramachandran worked at Moody’s in its CDO structuring group in the years preceding the crisis; with that experience in mind, he said crypto’s ascendance was a response to the centralized (and incorrect) assumption that US housing prices and other asset classes were always going to appreciate in value, creating the need for decentralized alternative asset classes. “Crypto and Bitcoin came out as a response to what was perceived as the ills of the fiat-based system of unbridled MMT and Keynesian economic theory,” Ramachandran told The Financial Revolutionist in an interview.

With that in mind, Ramachandran expects current banking woes to catalyze another wave of crypto-based innovation, particularly around crypto-backed stablecoins.

How

Ramachandran anticipates greater scrutiny over crypto because, he argues, it’s a “legitimate asset class” to the extent that “investors are going to wonder how it’s going to affect the banking system.” Not just US banking regulators, but also those in India, Singapore, and beyond, will begin to publish rulings that address this concern, he anticipates.

“That's not necessarily a bad thing, because regulatory clarity is actually good in the long term,” Ramachandran said. He said these regulatory demands will increase banking interest in stablecoins such as USDC and Tether.

Offering a glimpse into the visions of his peers, Ramachandran also said he saw a meme pushing for SVB customers to “be their own bank” by buying Bitcoin. He thinks SVB and Signature’s collapse could “spur on the emergence of more robust banking solutions” that showcase elements of decentralization within guardrails set up by regulators. That regional banks’ woes may force the Fed to reconsider the pace of its rate hikes is a further benefit to crypto, Ramachandran said.

When asked about crypto’s own regulatory failures—from Do Kwon’s Terra-Luna to Sam Bankman-Fried’s FTX—Ramachandran admitted that regulators could have done better to identify malfeasance. “They were enthralled by the sheer magnetism of the persona of SBF,” Ramachandran surmised, also diagnosing regulators’ slow-moving response to crypto as a question of their average age. While he assigned blame to bad actors and, in his eyes, old-school regulators for crypto’s shortcomings, he appeared to espouse a more systemic, rather than actor-driven, view on the 2008 banking crisis to which he was a witness: “The subprime crisis was a macro-regulatory failure in the sense that the whole banking system was set up for failure.”

Ultimately, Ramachandran thinks the current banking crisis will generate further scrutiny of risk management. Those same demands will push decentralized ecosystems to develop a proper stablecoin. “I think the current crisis, especially around these banks, is going to get many more smart entrepreneurs to start building yet another attempt at a Bitcoin- or crypto-backed stablecoin,” he concluded.