5 ms·

Backed by liquidity or by assets? I thought the article said that 90% of the funds were liabilities

• djbebs 4y ago
  Exchange business models are supposed to be 100% different from banks. If exchanges are using fractional reserves of any kind or amount, they have already committed fraud.
  • shawabawa3 4y ago
    Also people are missing that banks having 10% reserves doesn't mean their assets are 10% of their liabilities It means they have 10% of their deposits held as cash. The remaining 90+% is in liquid marketable securities (usually mortgages and other loans which are freely traded if they need the liquidity)
    • imtringued 4y ago
      Also, when you transfer money from one bank to another, that other bank may buy the assets of your bank or it lends the reserves to your bank. When cash is withdrawn banks can still borrow reserves from the central bank. That is kind of the whole point why we have central bank intermediation and why every country has adopted it.