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Fractional reserve allows banks to return some of their gains to the customer via interest. Does Custodia do that? If not, it's clear that they can both exist i
by IAmGraydon 4y ago
Fractional reserve allows banks to return some of their gains to the customer via interest. Does Custodia do that? If not, it's clear that they can both exist in the same market as they both offer different levels of risk and return. If Custodia were to pay interest with no risk (which is impossible), then yes, that would change the market.
- Lazare 4y agoCustodia would not have paid interest, and indeed, that's impossible. Functionally, Custodia was offering a "we'll park your cash in a safety deposit box in exchange for a fee" service, except offered by a dodgy outfit with a lot of crypto links. Now narrow banks - as proposed by, among others, TNB USA - would be effectively entirely safe and could pay interest. Efforts to set one up were shut down by the Fed because they would, in fact, be too attractive compared to traditional banks. See, eg, https://www.bloomberg.com/opinion/articles/2019-03-08/the-fed-versus-the-narrow-bank https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
- deleted 4y ago[deleted]