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Comment by gghhzzgghhzz | Hacker News Reader

there's no regulation, auditing or government backed guarantees / insurance on the exchanges.

so what happens when there is a run on an exchange, and it turns out that it does not hold the assets that it has on its books?

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People losing all their money (in an entirely foreseeable way) is a tragedy. But it isn't new, that has been a show on repeat for millennia. This time, at least the losses will be in something new.

Much like how the first dot com bubble doesn't change the transformative nature of the internet, a massive crash in crypto isn't going to be the end of this story. We might outlive Bitcoin, but no-one alive today will outlive cryptocurrencies. The only real question is how much change they will cause.

It's better for society than our current banking system, because the government considers our current system "too big to fail," so banks know that the government will bail them out if things get too bad, and the banks engage in risky behavior accordingly.

Plenty of banks went bankrupt or were acquired, so it's not quite true that the government will just bail out failed actors.

https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bank...

And of course the financial system as a whole is "too big to fail", but that would be true regardless of the implementation. Are you saying that if we switch to crypto then suddenly the financial system failing is OK?

Yes but banks are subject to a wide array of regulations, liquidity requirements and frequent third-party audits. And then, in crypto, you have Tether, whose reserves claims are dubious at best

That will always be true. Even with a 100% crypto world governments can use taxes/reserves/bonds/tariffs to prop up / bail out failing companies.

They just wouldn’t be able to use quantitative easing (easily - i.e. without global consensus) to do it.

Why not? Tether showed that quantative easing works just fine in cryptoland.

https://www.bloomberg.com/news/features/2021-10-07/crypto-my...

Tether is a counterfeiting operation.

> there's no regulation, auditing or government backed guarantees / insurance on the exchanges.

I consider this a feature, not a bug.

Depends which exchange - some are US regulated eg. Coinbase, Kraken.

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