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Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segr
by b112 3y ago
Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.
I think you meant to say here and unlike banks, because banks absolutely do not need to have sufficient funds to cover all customer's savings.
Unless.. are things different in the US? It's been a decade since I've read the Bank Act (Canadian), and when I did, only 5% of customer's account holdings were required to be held in tangible assets (gold, cash, etc), and inspected yearly by the Minister of Finance.
And I believe even that requirement has been dropped.
- WinstonSmith84 3y agoYes, banks typically do not have sufficient funds to cover all customer's savings, and when customers realize their bank played with their money but lost, they freak out and do a so called "bank run". At least banks are regulated, so that's fine, right. For those who have a short memory, a bank run last occurred earlier this year with the Silicon Valley Bank... https://www.investopedia.com/svb-financial-group-shares-crater-on-stock-sale-announcement-7253409 https://www.investopedia.com/svb-financial-group-shares-crat... By the way, if you put your cash money in a bank, your money is insured up to 250,000USD in the US and up to 100,000EUR in the EU. Anything above is your own risk. But it's perfectly fine because at least, it's regulated.
- lottin 3y agoCanada follows Basel rules for banking, which are much more complicated than that.
- b112 3y agoBasel does not hold sway over the Dominion of Canada! We follow Her Majesty's Bank Act. https://laws-lois.justice.gc.ca/eng/acts/b-1.01/ https://laws-lois.justice.gc.ca/eng/acts/b-1.01/
- lottin 3y agoWhat is this then? https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/basel23_nr.aspx https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/basel23_...
- legutierr 3y agoYou seem to be conflating “segregating customer funds” and “having enough assets to cover customer obligations.” Both banks and money transmitters (including Kraken) need to maintain sufficient assets to cover customer obligations. The difference is that for money transmitters those assets have to be liquid, while for banks they do not have to be liquid (which is why SVB got into trouble). On the other hand, neither banks nor money transmitters need to designate specific assets as being held on behalf of customers, specifically, separate and apart from their own capital or operating accounts. Designating specific accounts or balances as being held on behalf of customers is typically what is meant by “segregating customer funds”.