Of course they don't have all the money ! If they had, they wouldn't be targeted by virtually all financial regulators on the planet and they would publish a real audit.
eg -> ... "an industry based on confidence tricks".
If the Western governments want to take you down, no amount of words on a piece of paper sprinkled with legal incantations is going to stop them. They'll just decide something you did which was legal, is now illegal and go from there.
Your only real option is to abandon that sinking ship and let the captain feel in control. Years later when the population is on life rafts and they've elected a new competent captain, you can return.
Yes. Kraken.
> regular Proof of Reserves audits make it easy for clients to verify the balances they hold are backed by real assets, all with just a few easy clicks in their account.
Kraken knows this.
> Kraken voluntarily conducted the industry’s first Proof of Reserves audit and set a legitimate standard by accounting for not only our crypto balances, but also our client liabilities under the supervision of an independent auditor.
https://blog.kraken.com/post/16592/proof-of-reserves-or-proo...
Clearly, because they won't attest to liabilities (IE, how much money do they owe in total), but "client liabilities" (IE, how much money do they owe to their customers).
If they took out a loan for 100M, with their client's assets as collateral, that won't be covered by "client liabilities", but it sure as hell will be a problem when that loan gets called in.
If crypto is regulated, your crypto can be seized, frozen, held, and so on.. Why regulate it?
The big 4 accounting firms have all stated they won't take on more crypto audits. So have like the next 20 :)
That is true whether you're trying to do it right or not (IE It is independent of whether you are in the 0.1% of this stuff that is not a scam).
It's not reasonable to ask them to do something impossible, and then point out that they can't do it as proof of fraud. That's true even if it's impossible because of worries about fraud :)
It's instead reasonable to ask them to do what they can.
IE "Prove you aren't fraudulent by getting the big 4 to audit your liabilities" - "The big 4 won't take on more crypto audits due to worry about fraudulent companies and their own reputation" - "See, you are fraudulent!"
Does not work as an argument.
I mean, audits should trigger a collapse... I assume once people inside realize the audit passed, they'll be more blatant and likely to blow up their scheme.
So they haven’t sworn off crypto as an entire industry, they just won’t audit shady firms. And specifically binance has not been able to convince a major firm to audit them.
Also, it’s not that these crypto companies aren’t hiring big4, it’s that big4 won’t attest to reserves and other accounting standards. So it’s quite likely that crypto companies are attempting to hire, big4 do due diligence, detect shenanigans and refuse.
[0] https://blockworks.co/news/crypto-auditors-call-it-quits
It seems a lot more likely to me they were threatened by regulators or scared of what they would do, and created blanket policies about new clients or what they would attest to as a result than “we are doing diligence on tons of crypto firms that want us as clients and just saying no after we discover they are shady”
It’s much more likely that the big4, who have been doing the same thing for 100+ years, just applies their normal system when evaluating new clients- what is their ability to perform the work, what is their risk to the firm.
The fact is that they haven’t been audited. Financial regulation is set up so you don’t have to speculate or assume why this doesn’t occur. If it doesn’t occur, that’s bad from a risk mitigation standpoint.
Since crypto firms are logical entities that know the benefits of auditing and they have lots of funding and can afford it, it seems more likely that they don’t audit because they have bad books.
The threat to accounting firms by regulators is that if they audit incorrectly and attest to incorrect things then they will be shut down.
is different from “won’t take on more clients”.
There is no such thing as reputable audit firm. They will do whatever audited firm wants because they want to get paid for more audits.
(lightning or ethereum would also solve this problem, but binance has more users despite being a company instead of a protocol)
I've never advised my dad to take his crypto off of Coinbase, and he's been keeping it there safely for about six years at this point. It's the best place for him to keep it, for better or worse. I'm not there to transfer everything to a ledger as he trades, and I also don't really want to take responsibility for all of his funds anyway. If he started trading on Binance US (not gonna happen) then I would probably just tell him to send it to Coinbase. I don't keep my crypto on exchanges, but for a lot of people, it really is better than the alternatives.
Kraken as well. They don’t play the game other exchanges such as Binance play and are happy to function just an ordinary simple exchange. However it’s difficult to know since they are not a public company and proof of reserves means nothing without knowing how much debt the exchange has.
I don’t want to defend Binance. They are shady and they deserve to go down, but there is no week that goes buy that the USA does not sue anybody or closes a crypto friendly bank such as Signature. Off ramps are all crippled. The European Parliament wants to limit the amount you can deposit to a private wallet. It’s non stop to the point I personally laugh every time.
All this feels to me like a coordinated non stop attack and it already has a code name, operation chokepoint 2.0
In all fairness I wish HN was a bit more friendly to crypto specially to Ethereum which has switched to a more ecologically friendly model, that is innovating in regard to zk proofs… Specially in a month that Shanghai upgrade launches, and the probability that the SEC fills a lawsuit against the Ethereum Foundation will exponentially grow.
"Why are you so upset now that you found out I'm stealing grandma's savings? Don't you know I stopped beating my wife already. Also I'm doing much less meth these days. A man don't get no respect around here." -- crypto, the deadbeat cousin of actual tech.
A Ponzi scheme has a specific definition. Despite what HN seems to think, it is not shorthand for "crypto thing I don't like/understand".
Here's the common definition of a Ponzi scheme. While people can debate whether any specific coin or nft built on etherium is a Ponzi scheme, it'd be hard to argue that there aren't plenty of examples.
Etherium makes it easy to spin up a new "coin" or token, the article is a prime example.
> Many Ponzi schemes share common characteristics. Look for these warning signs:
> High returns with little or no risk.
Some new shit coins and many NFT projects absolutely make these bullshit claims, but it's well, well known that there's risk by speculating in crypto at this point. We've all seen multiple 80% drops in bitcoin's price (or you can with a simple look at the 5-10 year chart). It's no secret. People speculate in it anyway for other reasons.
> Overly consistent returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
Except for maybe stablecoins (which we found out this past year aren't exactly stable), no crypto coin can claim to have consistent returns.
> Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators.
This part is true for many crypto coins, and the SEC is going after them now. Bitcoin itself seems to be immune to this by having no centralized component to it, which is unlike most other coins.
> Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered.
Most exchanges are either licensed and registered if they operate in the US, hence their KYC measures.
> Secretive, complex strategies.
Yeah, some algorithmic stablecoins are like this (at least the complex part), and you've seen most of them collapse at this point. The rest are pretty simple coins for the most part, and many of them have completely open source code, so there's nothing secretive about it at all.
> Issues with paperwork. Account statement errors may be a sign that funds are not being invested as promised.
You can't really have an account statement error on the blockchain outside of a 51% attack (which is arguably not an error, just creating a new consensus), although some of the companies that have sprung up around it add obfuscation that can lead to possible account errors. Banks can have account errors as well, though.
> Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out.
This one can happen at exchanges, but the blockchains themselves still work and you can transfer with others directly, assuming you have taken your crypto off of exchanges ("Not your keys, not your crypto" as the saying goes).
[1]: https://www.investor.gov/protect-your-investments/fraud/type...
Unfortunately cryptocurrency and NFTs fit exactly the definition of a Ponzi scheme and it's quite easy to see why:
> Pon·zi scheme
> noun
> a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
Literally the entire basis of deflationary speculative "currency" is a Ponzi scheme. It has no value if new people don't buy in.
What is the enterprise? Cryptocurrencies themselves have no governance or accountability. They don't have any responsibility to continue to exist beyond the efforts of the participants that are propping them up. This is evidenced by the massive number of rug-pulls that constantly happen in crypto.
> is a statement that evaluates to true for any currency ever minted.
Except not really. Let's talk about USD. If there were no new participants introduced to United States currency at this point it doesn't become valueless because it is not a deflationary speculative currency. It exists as an agreed upon representation of value, it doesn't need to continue to consume new participants to justify its valuation, or continue to exist.
Let me ask you, is there a good or common reason to buy etherium today besides hoping that it increases in value? How would it increase in value if no new people were introduced to the system? How does crypto justify its existence in any way beyond convincing the next biggest sucker to buy in? Bonus points if you don't mention stocks.
A classic use case is engaging in commerce (whether it's with ETH, DAI, USDC, etc), without needing to trust a middleman like PayPal to not freeze or steal your funds. For this one needs ETH to pay gas.
Common: The middleman is still there in the most common case since most wallets are custodial. There are a ton of recent examples of exchanges freezing accounts, including the very article that we're commenting under, so I don't really get what you're talking about.
Good: It doesn't make sense to use a wildly volatile deflationary token as currency. Deflation discourages spending which is why there is no real currency that restricts the supply of money to a fixed amount, because it encourages hoarding.
I wouldn't argue that everyone should self-custody. If many users have access to convenient custodians who they can trust not to steal their funds, that's great. Not everyone does though.
I don't really have a stance on Eth's monetary policy, I was just trying to address your point about a use case.
Surely that wouldn't change the value of famous originals? Because their value is based on its provenance, not the physical difficulty of creating something like it. NFTs are the same - replicating a JPEG is trivial, but the replica won't have the same provenance.
You can just say you don't understand the appeal, that is a perfectly valid opinion.
What? Source.
How do they plan on enforcing this?
- traders would be forbidden from making or accepting anonymous crypto transfers over 1,000 euros unless the identity of the other party can be verified
- Businesses would be forbidden from accepting over 7000 Euros in cash
- transfers between private individuals would be allowed even if they are large
- They are seeking to ban anonymous accounts
- Mixers, tumblers and privacy coins should be taken into account as risk factors when assessing money-laundering risk
Again, I suspect this comes down to incompetency and isn't even intentional. They want to regulate the space but they don't understand what smart contracts are and how dApps work.
I'm not sure that's that bad. I've got some crypto wallets but the stuff has got there by me transfering fiat to Kraken, with KYC, passport scan etc and then the USDT or whatever to the wallet so it's easy enough to trace it to me.
If you allow fully anonymous stuff to interact with the regular financial system it does kind of leave it open to all sorts of tax evasion / illegal activities.
Do you want to make cash illegal and the government to trace every single financial transaction you do? Even worse, web3 is mostly not about money in the first place. Do you want them to track everything you do online, every app you interact with, every file you uploaded?
Tyranny. People make technology to get around their idiotic laws and control. Suddenly they must become more tyrannical than they were before just to maintain the same control they previously enjoyed. We'll either end up with anarchy enabled by subversive technology or totalitarian governments that regulate everything their citizens do online.
Who's going to show up at some untrustworthy place with fat stacks of cash in order to trade crypto?
> as it is initially meant to be used
It was meant to replace the USD for everything including everyday transactions.
Lots of people, actually. Its more common than you would think!
The hardest part is matchmaking and (optionally) escrow.
LocalBitcoin originally did this for IRL but then stopped as they were slapped by a regulator. They were taking a cut from the escrow and acting as a custodial wallet, which made it easy to spank them.
They are now kaput.
There are other, less stupid, platforms that replace them.
There are ways to transact P2P without meeting in person. Bisq is decentralized example.
> It was meant to replace the USD for everything including everyday transactions.
I did not read this chapter of the Bitcoin whitepaper
Yeah let's all be more friendly to burning down the planet in order to enable scams.
HN is often a terrible place for some topics, even surprising ones like computer graphics, and has its own clueless but opinionated "bros" the same way cryptobros are insufferable.
Of course I disapprove of old school banking scams as well. Beyond that, I won't engage in your whataboutism. It's not making the crypto pyramid schemes any better.
What is required to proof reserves is a full audit instead, which no shady speculator will do which is in fact what all these 'exchanges' are which also means your crypto is at full loss category if you are using them.
"Coinbase, Kraken Under Investigation by US Regulators" - https://bitcoinmagazine.com/legal/coinbase-kraken-face-us-in...
"Kraken Pauses Deposits, Withdrawals As Investigation On Fidor Bank Funding Continues" - https://thedeepdive.ca/kraken-pauses-deposits-withdrawals-as...
Hasn't coinbase repeatedly asked the SEC which tokens were securities and have yet to get answer... I don't think SEC strong arming is any indication of shadiness.
Meanwhile SEC says Ethereum is a security. Specially after the move to PoS.
It doesn’t seem they can even agree with each other.
This logic seems like wishful thinking that people can't get rekt by both the SEC and CFTC, they can.
The legality of all this isn’t confusing to anyone it’s just that they don’t like that answer.
"Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges" - https://www.sec.gov/news/press-release/2023-25
The unfortunate reality, though, is that Coinbase depositors ARE unsecured creditors of Coinbase and may lose their deposits in the event of a bankruptcy. This is all spelled out in their quarterly filings.
Not your keys, not your crypto as they say.
These are not the actions of a company following best practices for protecting depositors.
SVB implodes and investors (but not depositors) lose everything and it's ok.
You're nuts if you think there's no insider trading or pump and dumps on the stock market.
Seems like a double standard.
This all has more to do with maintaining a monopoly on the financial system and certain classes of participant in the US wanting to maintain the power to collect rents. And there really is no counterbalance to their unchecked authority.
Now, some stocks have a real value + speculative value on top. Netflix and many other tech companies are in this state, and the speculative value can go down way more than the real value. But the floor for Netflix stock is waaaaaaay above 0. The floor for BTC and similar is 0, by contrast.
As for pump-and-dumps and insider trading etc - sure, they happen, just as thefts and muggings happen. But they happen a lot less then in crypto-land where they are fully legal, and where, even if they weren't legal, no one would be checking for them.
"Bitcoin to zero" is a matter of faith at this point, I don't see it happening and I haven't heard anyone explain a good model for how it happens. US is certainly trying its best to outlaw it. Still won't go to zero.
I think my larger point is if the government wants to go after something, go after fraud--in crypto or "Fintech" or banks or stocks or whatever. And mostly they are! But then they're also leaning on banks to cut off the ability to convert crypto to fiat and that's a bunch of bullshit.
There are even corporations that announce buyback and then don't do it. For stock it's enough to jump up and then random shareholders that accidentally sell their shares in specific window that allows them to profit from such fake buyback get very rich while people waiting for buyback are left with the bucket. It's completely not pump and dump.
Let me tell you about the 90s...
"Expressing optimism or pessimism" also doesn't sound very scientific or rational.
Just for example the amount of wash trading in crypto is substantial, and if done on stocks would be found and prosecuted.
The entire cryptocurrency universe can go away and people can blow their disposable income betting on the horses or eating out instead. There will be no good or service missing in the market.
A lot of services would go missing, actually!
Ransomeware gangs would no longer be able to easily receive their ill-gotten gains. The North Korean regime would lose a major source of funding. Darknet drug marketplaces would have a much more difficult time facilitating illegal activities. Etc.
It should also be telling that just betting on the best performing stocks consistently is a more successful strategy than using intricate metrics and trendlines to try to predict future successes, just as counting cards is a better strategy than whatever astrology habitual gamblers come up with. Of course nothing tops the success rate of "insider trading" (i.e. cheating), which is why it's illegal.
What happened with GameStop and other meme stocks is exactly the definition of a pump-and-dump.
... and I say this as someone with enough faith in the stock market to invest heavily in it.
So is gambling.
Of course, "Illegal stocks" (or their equivalent) and illegal gambling aren't.
There are a lot of people who have got rich in crypto who are not 'the bank"
Sure if everything went to zero you could turn around and say there was nothing there but so far bitcoin goes up and up if with dips, while fiat currencies trend to zero if you adjust for inflation.
No guarantee of future performance, of course...
Except for all the times they have "halted withdrawals" while Tether printed out a couple billion fun bucks. Don't trust me, look for yourself: https://www.google.com/search?q=binance+halts+withdrawals
This is due to the security balance between difficult-to-access cold wallets containing the majority of funds, and easy-to-access hot wallets containing the minimum required for expected daily operations.
No idea on the coincidence with Tether minting, other than Tether mints often whether directly or indirectly as a result of market conditions, which of course may also be influencing exchange withdrawal dynamics.
Yes. Bitstamp.
> A decent rule of thumb is that all cryptocurrency exchanges are doing crimes, and if you’re lucky your exchange is doing only process crimes.
https://www.bloomberg.com/opinion/articles/2023-03-27/the-cf...
What's the fundamental value of Crypto?
It's utility? If so, I'm sure there's a calculation you could make that compares the number of "useful" legal transactions (economic activity) vs. the market cap. I'm assuming the numbers are probably ridiculous, however; the equivalent of 1,000s of dollars of "value" per real transaction.
My assumption is that the bulk of Crypto's actual value is its ability to hide flows of money from regulators (tax avoidance, drug money, silk road transactions, etc). KYC rules probably have helped in this regard, although I'd be interested in someone in the know having an opinion.
Do we have estimates for what % of crypto transactions are not provably legit?
How can they? SVB has made it clear that it is very difficult to maintain value. If Binance has invested all their money in securities, it's not unlikely that their investments have gone done down with the rising of the interest rates.
If they keep all money in regular banking accounts, they may still have it. But they are exposed to the risk that their bank or their banks become insolvent.
They claim to have divested of it all, without any losses, during a significant downturn.
Isn't adhering to KYC standards what we want? How is that bad?
Is anyone taking bets?
I'd be very interested in reading actual proof of them being shady. Please do share.
I hope they're solvent. But I'm not betting my money on that.
AML routines and that game I have no knowledge of. So maybe.
Binance came out of nowhere with massive fake volume, as a China-based exchange pretending to be based in Hong Kong. They've proceeded to thrive by having a reputation for giving accounts to anyone, globally (which, TBH, is not a bad thing as they operate in countries where it's better than trying to save in the local currency). And their home country is "somewhere you are not".
There is no basis for believing that they have maintained all the funds: why would they?
---
#Binance published cold wallet addresses and balances for 6 of our 600 coins. More to come. 475K BTC4.8M ETH17.6B USDT21.7B BUSD601M USDC58M BNBThese were public before anyway, but organized together for your ease of viewing.https://t.co/Jm6dVoDqM5
— CZ Binance (@cz_binance) November 10, 2022
https://web3isgoinggreat.com/?id=cftc-sues-binance-and-ceo-c...
> https://web3isgoinggreat.com/?id=cftc-sues-binance-and-ceo-c...
The link you posted is unrelated to your claim. It is about the US CFTC suing the Binance CEO on allegations of violating trading rules.
There is nothing mentioned there about about fraud or being banned in multiple jurisdictions.
That is fraud and there are many many other examples if you choose to do even a cursory search.
So what is 3? Why don’t we just have nationalized banking? I mean, seriously?
We need a secondary class of banks: ones that don’t leverage their deposits into investments, but rather simply keep people’s money safe.
That way you can choose your bank. Do you want a bank that will actually yield return on your deposits and pay you back in kind or do you just want to keep your money safe? It would effectively bring back investment carried savings but also allow people to store their money in safer banks with actual deposit insurance if that was their goal. The problem is that a bank is a bank and we don’t know what their business priorities or risk calculus is in any meaningful terms, so how are we supposed to choose a “safe” one?
There was actually a recent case where one bank (Custodia) tried to do this - they wanted to charge fees instead of gambling with their clients money. But the FED denied their application. They say it’s because they wanted to service crypto companies - but how would that even be a problem if they’ve always got all the deposits at hand. It smells fishy.
The problem is that those suggesting this aren't really engaging with how our finance system works. What they're saying is "I don't want my money at risk" but what they're proposing is "I don't want to ever be able to get a mortgage". They're saying "I'd be happy with an account that doesn't pay interest" but actually, if this product was offered, you'll likely find people still opt for the interest paying accounts that have risk because they aren't really capable judging that risk.
It's also just quite a difficult thing to imagine happening, can you imagine it - out comes this product from a bank "100% backed, guaranteed not to default, 20bps charge, 0 interest", and let's imagine it really is popular and capital flees to it. You've just caused the single biggest run on the US banking system in history. How do you mechanically actually make this work?
These bankers are dangerous idiots who are destroying millions to billions of value. It is a terrible idea to start handing out free passes to the people who enable them - ie, depositors. It is easy to imagine a bank that doesn't have bank runs - 100% reserves. If a person is going to put their money in banks well known to be a house of cards then they have some responsibility to pay for when the cards collapse.
We cannot sustain a system were people just donate money to Joseph Gentile again, and again, and again. They have to stop doing that. And losing money is the only way to make that happen, anything else will let too many cockroaches through the screen. Instead, the proof in the pudding right now is that he is one of the safest people in the world to give money to!
These regulators are the ones driving the market to take these stupid risks, they slowly drive out anyone who tries to make sane decisions by giving handouts to people who insist on setting their own money on fire. They're systemically removing the major incentives for people to think before acting.
There is an easy, sustainable path to a robust system here that creates wealth - stop making prudent investors pay for the reckless risk takers. That means we don't just pay out people who give no thought at all to what their money is funding.
Regulatory capture is more dangerous than no regulations because of naive people who dont see the graft despite it getting worse every year, decade after decade.
> 2) it’s not ok for people who put their money in banks to lose their money.
No, we can't agree. It's absolutely OK for the people who lent their money to banks to lose everything too. They shouldn't get bailed out at all.
> Why don’t we just have nationalized banking? I mean, seriously?
Yeah, governments with absolute visibility into and complete control of every single financial transaction. What could go wrong?
There is no such thing as "keeping money at the bank". People lend their money out to bankers so that it can be "efficiently allocated" and generate interest. If they don't realize this, that's their problem. If you want it to be a risk free operation, then say so. Say that you want fractional reserve banking to be outlawed. I'll agree with you.
Irrelevant what you and I think, forcing a system which will charge people rather than pay interest is unlikely to be popular with either customers or voters. As is causing random mom-and-pop depositors to lose money.
Why the hell doesn't the government come running to bail us out when we lose money? I want special banker privileges too. Maybe the government should bail out Tether as well and put an end to those "unbacked" concerns. It's for the best, right?
The only way to fix this is to ban fractional reserve banking (FTR: we have now something even worse than fractional reserve banking because now the deposit guarantee required is 0%, which means it's not even a fraction anymore). Good luck with that.
For countries like Venezuela and Argentina, Binance has a messianic reputation in the sense that P2P currency exchanges are what keeps the economy functioning for the lower-rank citizens. Top-tier citizens just use Zelle, but as you might not know, not everyone can afford/is allowed to go the U.S. and open a bank account (e.g. I, for instance, was denied a tourist visa last time, though I am more than able to afford vacations there).
If Binance were to fail, other P2P exchanges (like Reserve, Airtm and the now-dead Localbitcoins) wouldn't be able to take up with the current volume of P2P transactions of both countries.
I'm not saying these countries would grind to a halt as "direct" P2P currency exchange would still exist, but people that rely on Binance P2P for their day-to-day operations would downgrade their lifestyle, big time.
Crypto was created from the ruins of bailouts where the poor masses where put on the hook for the crisis created by central banks ad wall st. That hasnt changed. Innovation and critical mass usage will arise from the bottom up, Nigeria, Venezuela, Argentina, El Salvador. Nations like the US and EU will be the last to embrace it, at their peril, when they have no real other choice to not be left behind.
I my speaking in general here because I have no idea what you're opinion may have been on the SVB depositor bailout. The large majority of commentary I saw over the weekend after SVB failed was how it would wreck average customers and how the government had to step in to make them while. I'm not sure if it's because this is Binance or crypto in general but it seems like people either don't care or want to see it fail regardless of their depositors' investments
Meanwhile, over in crypto land, choosing to gamble on the volatile price swings of speculative digital assets (aka "magic beans") in a market driven in no small part by people evading laws—whether it's illicit purchases, money laundering, ignoring securities regulations, wash trades, pump-and-dump schemes, etc.—is a completely different matter.
It is still, in a certain light, sad that someone would become unemployed because their crypto startup employer's capital was lost in the collapse of a fraudulent exchange. Or someone lost their life savings. But really, what did you expect would happen?
While one could be less sympathetic of small business employees losing their income due to a bank failure or more sympathetic of a crypto user losing their life savings, they're drastically different circumstances. I don't see how one could expect people to either take a blanket "save all depositors and gamblers" nor "all depositors or gamblers should lose everything."
Keep in mind also that practically no one has argued in favor of shareholders in SVB getting anything but a 100% loss on their equity. If you view crypto people as "investors" then there should also be the expectation that one of risks they are taking by "investing" in magic beans is that whether or not they turn out to be magical, the place that stored them may unexpectedly blink out of existence.
There's already a process for depositors in a bank failure - FDIC insurance pays out up to $250k and the bank is taken over by regulators. The bank is eventually liquidated and depositors get priority on their share of the pie to get back as much as possible.
Why do we even bother having FDIC insurance if every deposit should be secured to 100%? How does that work without the guarantee of government bailouts easing the risk of bad bank investments? And how does that work at scale if multiple banks go under, where does the money come from to save depositors? Does every bank depositor bailout risk inflation?
There's just so many fundamental questions as to why we even have a fractional system if we don't, at the end of the day, want a fractional system. We can't have our cake and eat it too, either our money is thrown in a vault and always safe or the bank reinvested it and the money is replaced with an IOU.
I would say that at least any Americans who lose money there "deserve" what's coming to them since binance was banned in the US.
If a lot of customers take out their money and Binance goes out of business, that's fine. I mean, it sucks for Binance, but they are kinda shady and the world might be better off without them. If customers find out their deposits don't exist anymore, that's definitely not fine.