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there's no regulation, auditing or government backed guarantees / insurance on the exchanges. so what happens when there is a run on an exchange, and it turns

there's no regulation, auditing or government backed guarantees / insurance on the exchanges. so what happens when there is a run on an exchange, and it turns out that it does not hold the assets that it has on its books?

roenxi 5y ago
People losing all their money (in an entirely foreseeable way) is a tragedy. But it isn't new, that has been a show on repeat for millennia. This time, at least the losses will be in something new. Much like how the first dot com bubble doesn't change the transformative nature of the internet, a massive crash in crypto isn't going to be the end of this story. We might outlive Bitcoin, but no-one alive today will outlive cryptocurrencies. The only real question is how much change they will cause.
octopoc 5y ago
It's better for society than our current banking system, because the government considers our current system "too big to fail," so banks know that the government will bail them out if things get too bad, and the banks engage in risky behavior accordingly.
- yazaddaruvala 5y ago
  That will always be true. Even with a 100% crypto world governments can use taxes/reserves/bonds/tariffs to prop up / bail out failing companies. They just wouldn’t be able to use quantitative easing (easily - i.e. without global consensus) to do it.
  - shkkmo 5y ago
    Why not? Tether showed that quantative easing works just fine in cryptoland.
    - ShamelessC 5y ago
      https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether https://www.bloomberg.com/news/features/2021-10-07/crypto-my... Tether is a counterfeiting operation.
- reese_john 5y ago
  Yes but banks are subject to a wide array of regulations, liquidity requirements and frequent third-party audits. And then, in crypto, you have Tether, whose reserves claims are dubious at best
- mupuff1234 5y ago
  Plenty of banks went bankrupt or were acquired, so it's not quite true that the government will just bail out failed actors. https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bankrupted_during_the_Great_Recession https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bank... And of course the financial system as a whole is "too big to fail", but that would be true regardless of the implementation. Are you saying that if we switch to crypto then suddenly the financial system failing is OK?
tim333 5y ago
Depends which exchange - some are US regulated eg. Coinbase, Kraken.
bleachedsleet 5y ago
> there's no regulation, auditing or government backed guarantees / insurance on the exchanges. I consider this a feature, not a bug.

roenxi 5y ago

People losing all their money (in an entirely foreseeable way) is a tragedy. But it isn't new, that has been a show on repeat for millennia. This time, at least the losses will be in something new. Much like how the first dot com bubble doesn't change the transformative nature of the internet, a massive crash in crypto isn't going to be the end of this story. We might outlive Bitcoin, but no-one alive today will outlive cryptocurrencies. The only real question is how much change they will cause.

octopoc 5y ago

It's better for society than our current banking system, because the government considers our current system "too big to fail," so banks know that the government will bail them out if things get too bad, and the banks engage in risky behavior accordingly.

yazaddaruvala 5y ago
That will always be true. Even with a 100% crypto world governments can use taxes/reserves/bonds/tariffs to prop up / bail out failing companies. They just wouldn’t be able to use quantitative easing (easily - i.e. without global consensus) to do it.
- shkkmo 5y ago
  Why not? Tether showed that quantative easing works just fine in cryptoland.
  - ShamelessC 5y ago
    https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether https://www.bloomberg.com/news/features/2021-10-07/crypto-my... Tether is a counterfeiting operation.
reese_john 5y ago
Yes but banks are subject to a wide array of regulations, liquidity requirements and frequent third-party audits. And then, in crypto, you have Tether, whose reserves claims are dubious at best
mupuff1234 5y ago
Plenty of banks went bankrupt or were acquired, so it's not quite true that the government will just bail out failed actors. https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bankrupted_during_the_Great_Recession https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bank... And of course the financial system as a whole is "too big to fail", but that would be true regardless of the implementation. Are you saying that if we switch to crypto then suddenly the financial system failing is OK?

tim333 5y ago

Depends which exchange - some are US regulated eg. Coinbase, Kraken.

bleachedsleet 5y ago

> there's no regulation, auditing or government backed guarantees / insurance on the exchanges. I consider this a feature, not a bug.