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One key problem is bankruptcy. If the fintech ever touches the money and then goes BK, the court can and will pull back that money and likely pay some to folks
by lbwtaylor 4y ago
One key problem is bankruptcy. If the fintech ever touches the money and then goes BK, the court can and will pull back that money and likely pay some to folks who are not the customers, like employees who have senior BK claims.
In the linked hypothetical, fintech never touches the money, but the devil is in the implementation details and shortcuts happen.
- Asparagirl 4y agoThis is important: FDIC insurance protects you if the bank goes bust, but it doesn’t protect you if the company/fintech/exchange you’re using goes bust, even if they use an FDIC-insured bank. This exact issue came up repeatedly in the past few years with crypto companies whose FAQs and even executives falsely told people their deposited money was FDIC-insured simply because the company itself banked with an FDIC bank. That’s not how it works. One of many recent sad examples: https://mobile.twitter.com/Frances_Coppola/status/1543279013476683780 https://mobile.twitter.com/Frances_Coppola/status/1543279013... Another one: https://mobile.twitter.com/Frances_Coppola/status/1640909892952244225 https://mobile.twitter.com/Frances_Coppola/status/1640909892... (Frances Coppola is a great person to follow on Twitter.)