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> Tether is known not to be backed with sufficient real assets. You just gave a definition of fractional reserve banking.
by ur-whale 7y ago
> Tether is known not to be backed with sufficient real assets.
You just gave a definition of fractional reserve banking.
- Animats 7y agoNo, fractional reserve banking does not work that way, despite what the cryptocurrency community thinks. Most of a bank's assets are in the form of loans to others, usually with real assets, like houses or cars, behind them. The risks are loans going bad, and owning long term loans while taking short term deposits.
- perl4ever 7y agoilliquid != insolvent. If I have a house, I can't turn it into cash immediately. I may have a fraction of my net worth in cash. That's not the same thing as only having the small amount of cash and nothing else.