3 ms·

It can be crazy, in your opinion, but the fact is fractional reserve banking has been a standard practice in banking since the invention of banking. I don't kn

by lottin 5y ago

It can be crazy, in your opinion, but the fact is fractional reserve banking has been a standard practice in banking since the invention of banking. I don't know of any country where it's illegal. Whether it would be legal for crypto-exchanges, which typically don't have a banking license, to engage in fractional reserve banking I don't know. Even if it was illegal in the US, it could be legal in Cayman Islands, or elsewhere, and the result would be the same—an inflated supply of bitcoins circulating around the world. Also a lot of exchanges don't seem to be regulated at all. The ones that are regulated could just get a banking license.

woodruffw 5y ago
Fractional reserve banking isn't the crazy or illegal part. It's not crazy or illegal because it makes sense in the context of currency, where the purpose is denominational value and facilitating value transfers. The crazy and illegal part is the idea of "fractional reserves" in the context of a fixed-supply security. There's no such thing. I used the US as an example; what you're describing is illegal on every single major international exchange[1]. And as far as banking licenses go: the FDIC won't touch Gemini's actual non-third-party-custodial depository products with a ten foot pole, and they're about as clean as a cryptocurrency firm can be. If you want cryptocurrencies to "succeed" in some nebulous sense, it would be good to get a start on the "not just good for crime" part of the equation. This isn't it. [1]: https://en.wikipedia.org/wiki/Naked_short_selling#Regulations_outside_of_the_United_States https://en.wikipedia.org/wiki/Naked_short_selling#Regulation...
- lottin 5y ago
  Yeah, well that's your opinion. I don't think that you know what you're talking about. At any rate, my point isn't about whether crypto-currency deposits backed by fractional reserves are legal or illegal. My point is that the idea that there is a fixed supply of bitcoins is a lie, a marketing narrative to fool gullible idiots into thinking that the price of bitcoin can only go up. And my answer to that is to say that is 1) it's not true that a limited supply ensures that the price can only go up, and 2) it's not true that the supply of bitcoin is fixed, because financial institutions can create additional bitcoins via fractional reserves, and because as a consequence of international trade the supply of bitcoins in different economic areas would fluctuate (sometimes wildly) creating periods of inflation and deflation, just like it happened during the gold standard.

by lottin 5y ago

woodruffw 5y ago

Fractional reserve banking isn't the crazy or illegal part. It's not crazy or illegal because it makes sense in the context of currency, where the purpose is denominational value and facilitating value transfers. The crazy and illegal part is the idea of "fractional reserves" in the context of a fixed-supply security. There's no such thing. I used the US as an example; what you're describing is illegal on every single major international exchange[1]. And as far as banking licenses go: the FDIC won't touch Gemini's actual non-third-party-custodial depository products with a ten foot pole, and they're about as clean as a cryptocurrency firm can be. If you want cryptocurrencies to "succeed" in some nebulous sense, it would be good to get a start on the "not just good for crime" part of the equation. This isn't it. [1]: https://en.wikipedia.org/wiki/Naked_short_selling#Regulations_outside_of_the_United_States https://en.wikipedia.org/wiki/Naked_short_selling#Regulation...

lottin 5y ago
Yeah, well that's your opinion. I don't think that you know what you're talking about. At any rate, my point isn't about whether crypto-currency deposits backed by fractional reserves are legal or illegal. My point is that the idea that there is a fixed supply of bitcoins is a lie, a marketing narrative to fool gullible idiots into thinking that the price of bitcoin can only go up. And my answer to that is to say that is 1) it's not true that a limited supply ensures that the price can only go up, and 2) it's not true that the supply of bitcoin is fixed, because financial institutions can create additional bitcoins via fractional reserves, and because as a consequence of international trade the supply of bitcoins in different economic areas would fluctuate (sometimes wildly) creating periods of inflation and deflation, just like it happened during the gold standard.