With SVB and other banks having issues now, with crypto companies with stable coins (UST for example) collapsing, I’m wondering why there is no bank/crypto company that just holds your money 1:1, so even there is a bank run they can return all the money. You need some revenue to operate a company, but you can do it by charging customers a monthly fee and keep money as is without investing it anywhere and do not provide deposit/loans services, just storing your money and providing money transfer services (wire, checks, debit cards). Is it just eventually any company would love to earn more, so they invest it in some assets thus increasing the risk or something else?
Ask HN: Are there banks/crypto companies immune to bank run?
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Re: Ask HN: Are there banks/crypto companies immune to bank run?
#2Bank runs are rare while monthly subscriptions show up in your balance sheet every month. People prefer to take a minor risk instead of constantly losing money. If they don't trust the banks, they would just keep their savings under the floorboards or in assets like houses or gold.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#3BTC has been pumping hard since SVB, just sayin'
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#4Banks earn money by investing and making loans.
As a result, they don't have enough readily available cash to fully reimburse every depositor. This is called "fractional reserve" banking.
The backstop in the USA in case of a bank run is FDIC insurance --- as applied in the case of SVB.
The FDIC also applies rules and regulations to member banks designed to limit and mitigate the reasonably possible effects of a bank run.
Crypto has none of this.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#5Money market funds
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#6Most people are well under the insurance limit and would rather bank for free than pay fees.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#7You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank.
Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#8You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank. Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
IIRC government bonds are the "safest" option. Because the only way you lose them is if the US government collapses; and even if you think this could happen, if the US government does collapse, you have much bigger issues and also can expect every other currency to collapse as well (including Bitcoin/crypto, because most people will simply not accept it)
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#9You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank. Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
If you hold them to duration government bonds are fine. If you buy them, then interest rates go up, then you need to sell them ... well, SVB did that and now we're here talking about how NOT to do that.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#10You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank. Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
IIRC government bonds are the "safest" option. Because the only way you lose them is if the US government collapses; and even if you think this could happen, if the US government does collapse, you have much bigger issues and also can expect every other currency to collapse as well (including Bitcoin/crypto, because most people will simply not accept it)
How come, maybe they just stop printing new dollars when the govt collapse?
USD can exsist without govt. It can't exsist without army behind the paper , at least on paper.