Hacker News Reader

Comment by soerxpso | Hacker News Reader

> So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."

What? So if I go into the bank at 4 AM and ask to withdraw $100,000, and they respond, "Sure, we'll need a few hours to get those funds together," the bank has defaulted?

View on HN

Brokers are not banks. For real financial systems your stock are held 1:1 in a custody account in a separate company with regulations making sure you get to keep your stock even in the case of bankruptcy of the broker.

You can sell all your holdings at any second during the trading hours, no delay, the only problem you might face is that no buyers exist. That is something completely separate though.

What the crypto exchanges are doing is taking the Apple stock you think you bought and instead buy Wal-Mart. Hoping to pocket the difference when you eventually sell.

This works when the line goes up, or when you are a incredibly tightly regulated bank where the government through FDIC like schemes ensure that you will get your money back, even if the bank screws up.

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

Cash withdrawls have a ohysical aspect, cash. In the case of Binance, there is no such aspect. Obviously, banks have limits around cash withdrawls not the least due to limited amount of cash at hand at a given sight. Banks will happily allow you to wire transfer money wherever you want, since this is only a virtuap things and banks are required to have enough liquidity to serve those requests.

Crypto is no like cash.

If I understand the Binance situation correctly they do not claim to be holding USDC for you, if you give them USDC then they convert it to their BUSD token (also a stable coin) and that's what's listed on your account. So when you withdraw your BUSD to USDC, they may have to go buy some USDC to actual service your withdrawal.

I don't use them, I'm going off of this page: https://www.binance.com/en/support/faq/what-is-busd-auto-con...

Presumably they just need to wait until 9am when people at work, so I wouldn't consider that a default.

If they say they need a few hours at 9am, they've defaulted. It would be a big "ha" if they couldn't get them together by 9:05am because they've done shady things with your money.

That's not how banks work. You can't go into a bank and withdraw $100k in cash. Most banks don't hold that much cash.

Yes they do... and if it was an exceptionally small bank that didn't have it at the moment, with a day or two notice, they'd happily give you $100k in cash after receiving it from the Fed or from their vault cash providers. A busy ATM will contain more than $100k and on premises ATMs are often refilled from the bank's vault.

Do you believe that banks hold every dollar they receive in deposits in cash in their vaults?

Because that's not how banks work at all. They make loans, and if enough people demand their cash back they will have to move things around to honor those withdrawals. That's how every bank in known history has operated.

That's not how banks work

I'm not a fan of crypto, but that sounds like a stretch. I'm not aware you can go into any bank and withdraw e.g. a million just like that. It could be different in different countries, but there is a limit to what you can get done.

It could be careful manipulation on Binance's part, but we'll find out soon enough.

Umm.. that's not how banks operate. If I want to withdraw a million in cash, it is reasonable for the bank to ask me to wait until it mobilizes the cash. If they don't let me transfer money to another bank/account, that's problematic.

Most Canadian banks need a few business days just for 5 thousand and above in cash. There is more zeros in bank accounts there is physical money in circulation.

Yep it's basically legalized fraud, we take it for granted that that's how the system works, but still fraud.

Rich people like banks can basically create money that doesn't exist, while average Joes cannot.

Reply on news.ycombinator.com