This article assumes that depositor money is used for purposes other than backing the amounts of USD a depositor has in their account. I believe he also thinks

This article assumes that depositor money is used for purposes other than backing the amounts of USD a depositor has in their account. I believe he also thinks that it's possible the money is being used in a fractional-reserve fashion and backed by some bank to ensure liquidity if there is a momentary issue, but there is a real panic the bank will stop lending the money to cover for the moment and cause a real problem. e.g. it's possible, as it has happened before, that a trusted financial institution is playing a dangerous game to make money off sitting cash and uses someone else as a backup. The real question is: Does Coinbase (or any other exchange) do anything with the money (fiat) and how much is actually reserved? Same with Bitcoin. We can assume 100% on each side because they make money on fees of the exchange, but that's the real question here.