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I'm not sure how that would work. It sounds like the opposite of a normal bank relationship. In general the idea of fractional reserve is that you, the custome

I'm not sure how that would work. It sounds like the opposite of a normal bank relationship. In general the idea of fractional reserve is that you, the customer, deposit dollars in a bank account, the bank lends out those dollars to borrowers, but still allows you to come and get your dollars back at any time you like. This takes advantage of something like statistical multiplexing -- it is unlikely that everyone will want his dollars back at the same time. And in modern times it is backed up by various government schemes which will provide liquidity in the case of a run on the bank. If the bank issued you a cryptocurrency at a rate of $1/coin then it would be same thing as giving you your dollars back. It would reduce the banks reserves. I guess your scheme would make more sense on the other side of the bank. That is, the bank could lend out coins rather than dollars. But in that case there isn't a multiplier for coins, because the reserves would still be in dollars.

Ajedi32 9y ago
> If the bank issued you a cryptocurrency at a rate of $1/coin then it would be same thing as giving you your dollars back. It would reduce the banks reserves. Why would it reduce their reserves? The bank would still be holding your USD, and they only have to give it back when you trade the coin back to them for cash.
- bradleyjg 9y ago
  In that model the bank is selling you a coin for USD. It takes your $100 and issues you 100 coins. That $100 is no longer yours--you have the coins instead, though the bank promises that it will buy them back at a $1 per coin. On their books they have a liability of $100 (the repurchase obligation) and they have $100 in cash. You're right that it doesn't affect their reserves, but it also doesn't act as a multiplier. The liabilities and assets balance. In order for there to be a multiplier the bank would have to issue coins and still allow the customer to access the cash as a deposit. Thus the coins would be being lent as opposed to sold.
  - Ajedi32 9y ago
    Right. How is that any different from when you deposit $100 in the bank and the bank promises to give you your $100 back when you ask for it? That doesn't reduce their reserves; it _increases_ them. Only difference with using coins this way is that rather than the $100 being tied to you as an individual, it'd instead be tied to the coin itself. (So whoever possesses $100 worth of the bank's coin can get that same amount back in USD.)
    - dragonwriter 9y ago
      Right. Basically a redeemable pegged coin is equivalent to a no-discount (zero-yield) bearer deposit note.
      - Ajedi32 9y ago
        Thanks for the search keyword. Seems like bearer deposit notes are indeed legal. (Though it seems like they're not insured.) So it seems like this concept could work after all?

Ajedi32 9y ago

> If the bank issued you a cryptocurrency at a rate of $1/coin then it would be same thing as giving you your dollars back. It would reduce the banks reserves. Why would it reduce their reserves? The bank would still be holding your USD, and they only have to give it back when you trade the coin back to them for cash.

bradleyjg 9y ago
In that model the bank is selling you a coin for USD. It takes your $100 and issues you 100 coins. That $100 is no longer yours--you have the coins instead, though the bank promises that it will buy them back at a $1 per coin. On their books they have a liability of $100 (the repurchase obligation) and they have $100 in cash. You're right that it doesn't affect their reserves, but it also doesn't act as a multiplier. The liabilities and assets balance. In order for there to be a multiplier the bank would have to issue coins and still allow the customer to access the cash as a deposit. Thus the coins would be being lent as opposed to sold.
- Ajedi32 9y ago
  Right. How is that any different from when you deposit $100 in the bank and the bank promises to give you your $100 back when you ask for it? That doesn't reduce their reserves; it _increases_ them. Only difference with using coins this way is that rather than the $100 being tied to you as an individual, it'd instead be tied to the coin itself. (So whoever possesses $100 worth of the bank's coin can get that same amount back in USD.)
  - dragonwriter 9y ago
    Right. Basically a redeemable pegged coin is equivalent to a no-discount (zero-yield) bearer deposit note.
    - Ajedi32 9y ago
      Thanks for the search keyword. Seems like bearer deposit notes are indeed legal. (Though it seems like they're not insured.) So it seems like this concept could work after all?