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Digital Bank Run 2023

Unless you’ve been hiding under a rock, you’ve seen the recent news about Silicon Valley Bank.

Let me give you basic background. Silicon Valley Bank is based in California and caters to entrepreneurs in the US and internationally. The main client is a tech entrepreneur who has a “startup” company. Think Facebook back in 2003 or 2004. This “tech” community is very close and they all communicate using texts, twitter, YouTube, podcasts and other forms of technology to share information together. Think of herd mentality in the digital world.

I was attending a birthday party this weekend for a child who attends daycare with my son and spoke to another dad at the birthday party. He disclosed that his firm used Silicon Valley Bank and used the bank as a startup in the EV space. Wow. By the time I got home Sunday evening, my wife has received texts from a friend who had married an entrepreneur and had all of their personal money inside SVB!  Over 3 or 4 days, the financial system had become extremely fragile.

Several things really hit home with me as a financial professional who lives inside the financial system every day during my work. 1) The government and the U.S. legal system is way behind the technology curve and it’s beginning to cause big problems. 2) The traditional banking system is starting to die and it’s being replaced by new technology and new innovation in the digital world. 3) Bank runs are now 100% digital.

Has anyone thought about that? What happens when you can move money in seconds using your iPhone?

Since the great financial crisis in 2007-2009, I’ve always thought the next big financial crisis would be a technology driven crisis. It looks like this may be one of the first fissures in our economic system. Only time will tell.




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