On a side note, the fact that bank runs are rational decisions and that no FDIC-style agency exists to change the incentives seems bad for cryptocurrency in general.
(Possible responses include both "the traditional financial system and fiat currency is actually pretty good" and "someone should run a reliable FDIC equivalent as a business for new exchanges and new coins".)
Isn't a bank run only an issue if the bank is using a fractional reserve? Cryptocurrency exchanges aren't banks; they're not supposed to keep a fractional reserve. If everyone suddenly demands all their coins at once, the exchange should have no trouble complying with that.
The only problem is that there's no way to know for sure whether an exchange is running on a fractional reserve or not.
The issue is that they do run fractional reserves, even if they aren't supposed to. Much like banks of the 1600s.
They claim that they don't. If they do, that is a serious problem. Some of the exchanges have, but there is no evidence i'm aware of that points to any of the current major exchanges running a fractional reserve.
The issue is that once there is evidence there is a bank run. Mt Gox wasn't supposed to, but they did. And there are others out there that I hear rumours about having 5 or 10% of their reserves stolen from hot wallets. Sure it's fine if there is never a run, but it's worth pointing out that this is a real threat vector.
Ya, no argument from me there. It's definitely a threat. I just don't think it should be stated as fact that they do run fractional reserves without evidence of that.
I was around during MtGox too. This is nothing like MtGox. The difference is frozen funds. MtGox froze people's money. Bitfinex hasn't. Simple as that.
Huh? This is pretty much exactly like Mt. Gox. At first Mt. Gox only suspended people's ability to withdraw USD, like Bitfinex. Then they suspended people's ability to withdraw BTC (apparently people have been experiencing delays getting crypto withdrawals to go through on BFX recently?). Even then they still allowed people to send money between accounts within the exchange, which resulted in a secondary market of people buying "Goxbux" from other people with money stuck in the exchange (at a discount, of course; basically betting that Mt. Gox was actually solvent).
I can withdraw crypto from Bitfinex just fine and have done so recently. Taiwanese fiat withdrawals process just fine. In this case, we have confirmation that their foreign wire transfers are legitimately frozen. They're not lying about that. I don't see much comparison to MtGox at all.
When you have to choose between following a pre-bankrun rumour or following unsubstantiated pushback, follow the rumour. It costs you maybe 5% to get out vs 100% if you're wrong and banks / money holders compete on assuring people that there is less risk with their solution so if Tether can't provide assurance then that is their problem. Cut and run.