Bitcoin economist, Tuur Demeester, explains why the idea of a ‘Central Bank’ of Bitcoin would create more problems than it would solve.
Bitcoin Exchanges Similar To Early US Banking System
In the wake of the Binance hack and Bitfinex/Tether debacle, are crypto exchanges becoming ‘too big to bail’? And if so, should we be looking towards a ‘Central Bank Of Bitcoin’ as a solution?
Bitcoin economist, Tuur Demeester, explains why he thinks that would be a particularly bad idea.
As cryptocurrency exchanges and custodians grow in size they risk becoming too big to bail out. Without a ‘lender of last resort’, the only option is to consider private insurance solutions.
Some are setting up their own insurance funds, such as BitMex, which has over 25,000 BTC reserved.
Bitfinex decided that it could use the US dollar reserves of Tether as its personal slush fund, with predictable results. If custodians become over-leveraged we can expect to see more ‘bank-runs’ similar to that we witnessed on Tether at…