
World’s Central Bank: Crypto Could Risk Bank Runs - cech
http://www.darkwebguide.net/worlds-central-bank-crypto-could-risk-bank-runs/
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jdc
Here's the paragraph the title refers to:

"Arguably, the most significant and plausible financial stability risk of a
general purpose CBDC is that it can facilitate a flight away from private
financial institutions and markets towards the central bank. Faced with
systemic financial stress, households and other agents in both advanced and
emerging market economies tend to suddenly shift their deposits towards
financial institutions perceived to be safer and/or into government
securities. Of course, agents could always flee towards the central bank by
holding more cash. But a CBDC could allow for “digital runs” towards the
central bank with unprecedented speed and scale. Even in the presence of
deposit insurance, the stability of retail funding could weaken because a
risk-free CBDC provides a very safe alternative."

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JumpCrisscross
The Bank for International Settlements (BIS) [1] is not the "world's central
bank." It isn't even a central bank. It has no monopoly on any monetary base
and does not act as a lender of last resort [2].

[1]
[https://en.wikipedia.org/wiki/Bank_for_International_Settlem...](https://en.wikipedia.org/wiki/Bank_for_International_Settlements)

[2]
[https://en.wikipedia.org/wiki/Central_bank](https://en.wikipedia.org/wiki/Central_bank)

~~~
provost
I agree, and I’m flagging this post as this user has spammed the same website
repeatedly all day.

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bfung
Is this even a legit reporting site?

HN user only posts articles from that site:

[https://news.ycombinator.com/from?site=darkwebguide.net](https://news.ycombinator.com/from?site=darkwebguide.net)

[https://news.ycombinator.com/submitted?id=cech](https://news.ycombinator.com/submitted?id=cech)

Looks most likely a bot posting.

------
DINKDINK
The reason why Bitcoin will cause the mother of all bank runs is because
Bitcoin will eat up banks' liquidity that is desperately needed to keep the
leverage ratios in check. Rather simply, because banks take in deposits and
then generate revenue, by extracting the value of your capital, by lending it
out to other people at interest. This is the most common form of money
creation in the economy (with other people focusing on T Bills, quantitative
easing, etc) If people continue to dump dollars/fiat (which are only liquid if
your bank doesn't screw up and over leverage themselves) for money that is
always liquid (Bitcoin) then essentially the liquidity that banks rely on
dries up, their leveraging goes up, and the slightest market hiccup causes an
intra/inter-bank liquidity-failure cascade. [2]

Given that typical leverage ratios are ~3-5%[1] (or banks only have 1 dollar
for ever 33 dollars they say they have) and that the total supply of M1 is ~4
Trillion [3], the balance they have available (5%*2e12=$200 billion) is
hitting the first threshold of concern because Bitcoin's market cap is ~$150
billion and cryptocurrencies in total are $360 Billion[4] (though volume would
be a better indication of flows). No wonder central banks are literally
conspiring to smear Bitcoin[5] rather than admit their own incompetence. Once
the Bitcoin/cryptocurrency market caps approach ~$800 billion (equivalent
liquidity of M2 leverage) the sparks are really going to fly in liquidity
problems with banks.

Will banks avoid this? My guess is no, because such a CBDC won't allow the
squish that banks need to cook books or mask liquidity problems as "Crises of
confidence" and the competitive forces demand higher and higher amounts of
leverage and that the government has colluded with the banking industry to
constantly socialize their losses, while the banking sector privatizes gains.
For more reading check out, The End of Alchemy [7]

Which do you think is more likely Bitcoin is going to stop working or banks
will under-engineer their financial safety factors and fail (like they've
habitually done)? Hopefully you have your skin in the game your gut tells you
is going to happen.

[1] [http://www.businessinsider.com/fdic-report-on-leverage-
ratio...](http://www.businessinsider.com/fdic-report-on-leverage-ratio-names-
deutsche-bank-as-riskiest-2016-9)

[2]
[http://nakamotoinstitute.org/mempool/hyperbitcoinization/](http://nakamotoinstitute.org/mempool/hyperbitcoinization/)

[3]
[https://fred.stlouisfed.org/series/M1](https://fred.stlouisfed.org/series/M1)

[4] [https://coinmarketcap.com](https://coinmarketcap.com)

[5] [https://cointelegraph.com/news/polish-central-bank-
secretly-...](https://cointelegraph.com/news/polish-central-bank-secretly-
funds-anti-crypto-youtube-propaganda-videos)

[6]
[https://fred.stlouisfed.org/series/M2](https://fred.stlouisfed.org/series/M2)

[7] [https://www.goodreads.com/book/show/30231791-the-end-of-
alch...](https://www.goodreads.com/book/show/30231791-the-end-of-alchemy)

------
aunty_helen
If the coin is run by the central bank then they could put up >50% of the
mining capacity. Then if there was a run, just ignore transactions.

~~~
freejulian
Why would anyone choose to hold a coin controlled by the central banks if it’s
the system created by the central banks they’re trying to escape? The safest
and most proven cryptocurrency is Bitcoin - and that’s where the flight to
safety would be.

~~~
aunty_helen
If your chequing / savings bank uses the CBDC like they do currently with CB
issued fiat, you may not have a choice.

If the central bank regulates that they must use it for bank to bank non-forex
transfers, you may have even less of a choice.

Think of the CBDC as a replacement for the current fiat transfer mechanisms
and less of a bitcoin decentralisation project.

On the other side, a CB backed currency does have it's advantages. Stability
and security being the biggest (perceived).

~~~
freejulian
We don’t have a stable CB backed currency today though. The USD loses, at
best, 2% of its value a year. That’s not stable.

~~~
pjc50
Bitcoin frequently changes in value by more than 2% every single day.
Sometimes within the 15 minute confirmation window.

Price stability has very little to do with money supply and more to do with
the wider economy.

------
gruez
title: "World’s Central Bank: Crypto Could Risk Bank Runs"

0 mention of "Bank Runs" in the article.

flagged.

~~~
jdc
It is a click-bait title, but the phrase "digital run" does appear on page 22
of the paper.

[https://www.bis.org/cpmi/publ/d174.pdf](https://www.bis.org/cpmi/publ/d174.pdf)

------
CryptoPunk
Anyone caught in a bank run only has themselves to blame. It's their
responsibility to not deposit their money in an over-leveraged bank.
Unfortunately due to FDIC insurance, consumers now spend more time researching
the quality of the LCD monitors on the market, when deciding which one to buy,
than the future financial solvency of banks, when deciding which one to trust
their money to.

~~~
ISL
It is not an unfortunate fact -- civilization moves forward when we increase
the number of things we can do without thinking.

FDIC, as the underwriter, has the power _not_ to insure a manifestly poorly-
run bank. Thus, the FDIC mark is a defacto sign that a bank can be trusted by
a consumer.

I would much rather have FDIC (or a system of robust private bank insurance)
than need to vet each prospective bank's balance sheet, employees, and loans
when choosing to open a personal checking account.

~~~
CryptoPunk
Being responsible for yourself doesn't mean you don't delegate. It means you
have to stay on top of who your delegate is. FDIC means you simply tax others
when you screw up. The insurance premium has no relationship with your risk
profile.

Responding to below:

>>Successfully rescuing a bank from a run is not only a benefit to society as
a whole but often makes a small net profit.

This is the free lunch fallacy used to justify involuntary income
redistribution. If it were indeed profitable on average, the market would do
the bailing out.

Bailing out the irresponsible prevents the evolutionary process of weeding out
reckless and incompetent business models and behavioural patterns from
working, while unfairly burdening those who are competent in their management
of capital, which inhibits the expansion of their influence.

~~~
pjc50
Successfully rescuing a bank from a run is not only a benefit to society as a
whole but often makes a small net profit.

