Re:Tether Withdrawals Top $10B
by MichaelBurge on Tuesday May 24, 2022 @03:23AM
(#31489050)
> you cannot have a bank run anymore. It's not possible. As such fractional reserve isn't a meaningful risk to depositors.
It's not possible for the "average person" to lose bank deposits. But if a cryptocurrency company is storing much more than FDIC limits in a single bank(because few banks are willing to deal with them), you could easily have a run on that bank.
So even having $1 of USD backing reserves for $1 of USDT, there could still be withdrawal limits, halts, etc. because the underlying bank lent the deposits out.
It needs to be paper cash in a safe to really protect against mass-withdrawals, and even then getting it "into the system" when people want it back could take a few days and lead to temporary halts.
It's not possible for the "average person" to lose bank deposits. But if a cryptocurrency company is storing much more than FDIC limits in a single bank(because few banks are willing to deal with them), you could easily have a run on that bank.
So even having $1 of USD backing reserves for $1 of USDT, there could still be withdrawal limits, halts, etc. because the underlying bank lent the deposits out.
It needs to be paper cash in a safe to really protect against mass-withdrawals, and even then getting it "into the system" when people want it back could take a few days and lead to temporary halts.