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If I want to keep my BTC at an exchange or bank with deposit insurance, I can choose to do so for myself, thanks. Don't get me started on the notion of deposit

If I want to keep my BTC at an exchange or bank with deposit insurance, I can choose to do so for myself, thanks. Don't get me started on the notion of deposit "insurance" backed by razor-thin reserves against the total level of liabilities, like what the FDIC represents today. It's hard to imagine a more effective engine for creating moral hazard (and ultimately systemic risk, although we still have yet to see this manifest itself with the FDIC, I think it's coming). As I see it, one of the biggest potentials wins from the Bitcoin ecosystem is bringing back the possibility for custodians to compete on terms of liquidity and safety. It would be a shame if that potential was squandered by a meddlesome intervention like yours.

pjc50 13y ago
compete on terms of liquidity and safety But this doesn't work, because the public have no real means of assessing either of these and Akerlof's Market For Lemons applies.
- crazy1van 13y ago
  If "the public" doesn't have the means to assess it, do you really think that a handful of regulators will have the means? After all, the public is a superset of the regulators. Didn't we already try the whole a-handful-of-experts-in-the-government-will-keep-the-system-safe thing leading up the last financial crisis? The portions of effort just aren't there to make that work. One single large financial institution can employ many more lawyers and accountants intent on skirting regulation than law makers and gov't agencies can employ intent on reigning them in.
- AndrewBissell 13y ago
  The public has very little (it's inaccurate to say "no") means of assessing the safety of banks precisely because the government has told them not to worry about it, to just bank wherever and let the FDIC sort everything out. There is almost no market demand whatsoever for liquidity or safety reporting services in USD banking Before the FDIC's existence, there was a plethora of publications, audit services, and third-party examiners for banks -- a kind of like Consumer Reports for financial institutions. If fractional reserve banking ever takes hold in Bitcoin (and there's reason to doubt that it will, the system is kind of designed to discourage it as much as possible), I expect something similar will arise in Bitcoin. Here's a paper talking about the bank reputation ecosystem and how it worked in the pre-FDIC days. Contrary to popular modern perceptions, it wasn't an era of constant boondoggles by shady wildcat banks. http://www.nber.org/papers/w4400.pdf?origin=publication_detail http://www.nber.org/papers/w4400.pdf?origin=publication_deta...

pjc50 13y ago

compete on terms of liquidity and safety But this doesn't work, because the public have no real means of assessing either of these and Akerlof's Market For Lemons applies.

crazy1van 13y ago
If "the public" doesn't have the means to assess it, do you really think that a handful of regulators will have the means? After all, the public is a superset of the regulators. Didn't we already try the whole a-handful-of-experts-in-the-government-will-keep-the-system-safe thing leading up the last financial crisis? The portions of effort just aren't there to make that work. One single large financial institution can employ many more lawyers and accountants intent on skirting regulation than law makers and gov't agencies can employ intent on reigning them in.
AndrewBissell 13y ago
The public has very little (it's inaccurate to say "no") means of assessing the safety of banks precisely because the government has told them not to worry about it, to just bank wherever and let the FDIC sort everything out. There is almost no market demand whatsoever for liquidity or safety reporting services in USD banking Before the FDIC's existence, there was a plethora of publications, audit services, and third-party examiners for banks -- a kind of like Consumer Reports for financial institutions. If fractional reserve banking ever takes hold in Bitcoin (and there's reason to doubt that it will, the system is kind of designed to discourage it as much as possible), I expect something similar will arise in Bitcoin. Here's a paper talking about the bank reputation ecosystem and how it worked in the pre-FDIC days. Contrary to popular modern perceptions, it wasn't an era of constant boondoggles by shady wildcat banks. http://www.nber.org/papers/w4400.pdf?origin=publication_detail http://www.nber.org/papers/w4400.pdf?origin=publication_deta...