A fractional reserve crisis - 0 views
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John Kiff on 16 Apr 23"The crisis that has engulfed crypto in the last year is a crisis of fractional reserve banking. Silvergate Bank and Signature Bank NY were fractional reserve banks. So too were Celsius Network, Voyager, BlockFi, Babel Finance and FTX. And still standing are the crypto fractional reserve banks Coinbase, Gemini, Binance, Nexo, MakerDAO, Tether, Circle, and, I would argue, every one of the DeFi staking pools. All of these are doing some variety of fractional reserve banking. Custodia Bank and Kraken Finance claim to be full-reserve banks - but 100% reserve backing for deposits is both hard to prove and not a guarantee of safety. What do I mean by "fractional reserve banking"? My definition might surprise you. For me, fractional reserve banking simply means that the composition of a bank's assets is less liquid than that of its liabilities."