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Comment by codehalo | Hacker News Reader

Those assets are not Binance's to "lose".

it's "Assets Under Management" and every bank has this number as a KPI, which directly affects their top+bottom line. So it is to "lose" but it's not the same.

Binance is a crypto exchange, not a bank.

Fair, but we will also see how much "not a bank" they really are. Based on FTX, they are absolutely a bank.

Every central bank, incl. Wells Fargo, Bank of America, Citigroup etc. utilizes fractional reserve.

Those are banks, not crypto exchanges. Fundamentally different. Additionally, fractional reserve banks are FDIC insured up to $250,000 of an account.

And fractional reserve banking is just legalized fraud. Demand deposits should not be loaned out.

I could maybe understand the argument that fractional reserve banking is fraud, if it weren't for the fact that deposits are legally required to be insured by the bank.

In 1974, FDIC insurance backed up to $100,000, or almost three median new houses sold that year. Now, it is $250,000, or just a little over half the median price of a new home. https://fred.stlouisfed.org/series/MSPNHSUS

The value of that insurance has gone down significantly over time because of inflation.

That does not actually indicate anything about the insurance limit not matching inflation because housing prices are not necessarily flat. In fact they are not. However, the fdic insurance limit is indeed worth less now, but most people don’t even have $5,000 in the bank. The mean bank account balance is $40,000 according to a quick Google search.

This is all true, however I don't think very many people keep $100,000, let alone $250,000 in their bank account. There are far more lucrative places to park your money.

The main difference is that they haven't (yet) secured a banking license. But they were not far from it, FTX bought a U.S. bank that it probably wanted to use for legal fractional reserve.

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