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I suspect that if you deposit 100 ETH at FTX, legally, you no longer own the 100 ETH. Instead, you own an IOU from FTX stating that FTX owes you 100 ETH. FTX ow

I suspect that if you deposit 100 ETH at FTX, legally, you no longer own the 100 ETH. Instead, you own an IOU from FTX stating that FTX owes you 100 ETH. FTX owns the ETH. In an ideal world, an IOU from FTX for the amount of 100 ETH would be worth 100 ETH. Unfortunately, FTX is insolvent and bankrupt. The only thing the bankruptcy court can do is divide up FTX’s assets and distribute whatever FTX does have to their creditors. That is naturally going to entail taking possession of those assets. This used to be a risk even with banks, and a lot of people during the Great Depression lost the money they had in the bank due to bank insolvency. The solution to this problem was the FDIC. If you have an American bank account, not only do you have an IOU from the bank for the number of dollars you have in that account, you also have an insurance policy from the FDIC that will pay you the value of the account (up to a specific limit) if the bank is unable to do so. And if the FDIC isn’t good for the money, that would mean the US government has defaulted on their debt, which probably means it’s the end of days, your dollars would have been worthless anyway, and you’re just going to have to get by on whatever canned food, water purification tablets, and ammunition you’ve managed to stockpile in your house until the world re-stabilizes into whatever cyberpunk dystopia comes after the collapse of the United States.

VLM 4y ago
(up to a specific limit) Historically that limit has always been waived during bank collapses, although my inability to remember a specific historical counterexample does not disprove its existence. edited to add the limit still exists on the books for marketing purposes, in a weird turn of events unregulated non-banks liked to market that they're "as trustworthy as a bank" because they bought a bond policy for the FDIC limit so feel free to write them a check for less than the FDIC limit because they're bonded. The unregulated industries would get REALLY mad if the FDIC limit were doubled legally because then they'd have to pay about twice as much to get their bond. Then the FTC got real mad and I don't recall the outcome of that story although I don't see many references to the FDIC anymore in marketing material from unregulated companies, so that must not have gone well. This all went down in, like, the 80s not like last week or whatever.

VLM 4y ago

(up to a specific limit) Historically that limit has always been waived during bank collapses, although my inability to remember a specific historical counterexample does not disprove its existence. edited to add the limit still exists on the books for marketing purposes, in a weird turn of events unregulated non-banks liked to market that they're "as trustworthy as a bank" because they bought a bond policy for the FDIC limit so feel free to write them a check for less than the FDIC limit because they're bonded. The unregulated industries would get REALLY mad if the FDIC limit were doubled legally because then they'd have to pay about twice as much to get their bond. Then the FTC got real mad and I don't recall the outcome of that story although I don't see many references to the FDIC anymore in marketing material from unregulated companies, so that must not have gone well. This all went down in, like, the 80s not like last week or whatever.