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Re: [Taler] What happens when an exchange goes bankrupt?

From: Christian Grothoff
Subject: Re: [Taler] What happens when an exchange goes bankrupt?
Date: Thu, 21 Jul 2022 13:52:20 +0200
User-agent: Mozilla/5.0 (X11; Linux x86_64; rv:91.0) Gecko/20100101 Thunderbird/91.11.0

On 7/21/22 13:38, Calvin Burns via Taler wrote:
> On Wed, 07/20/2022 06:29:43 AM, Christian Grothoff wrote:
>> On 7/17/22 15:52, Calvin Burns via Taler wrote:
>>> Thank you!
>>> Do you know if there is something similar in place for the banking system?  
>>> What
>>> happens if a bank goes bankrupt, say the bank the exchange has its accounts 
>>> at?
>> Well, I would primarily think that the exchange operator *is* a bank.
>> And so in that case there are ways to separate/protect the assets.
> Thanks again for the comment.
> It seems to me that Taler does not assume or enforce (Taler) bank = Taler
> exchange.  For instance the bank could be run by the community, creates 
> "money =
> -credit" and "gives" it to a merchant to run an (Taler) exchange.  I think the
> exchange can be considered a merchant (= Taler merchant) because it provides a
> service and gets payed for it.
> In the scenario bank = Taler exchange embedded in the current system: my
> impression is the separation/protection does not exist: If I give cash to the
> bank I loose "ownership".  In return I only get the _promise_ to get it back. 
>  A
> promise that is regularly/usually broken: currently with a Chinese bank, I 
> think
> (bank run). And notice how banks and government, corporations and even
> physicians try to prevent you from getting and using cash.  It's even worse: I
> have to _pay_ for this empty promise a lot. So I guess to separate the payment
> system, especially Taler, from the private bank's economic state in the 
> scenario
> bank = (Taler) exchange and in the current system some law or the organisation
> of the banking system needs to change.

Sure, if an exchange keeps the money at a bank, the bank's financial
viability is a risk for the exchange and it's clients.  If a community
wanted to run such a system and wants to avoid such risks, it could do
so by creating a regional currency that it creates per fiat (like a
central bank). This assumes, of course, that such a regional currency is
legal in the jurisdiction of the community. And it creates another
risk/challenge, which is the fluctuation of that regional currency
against other assets. Ultimately, there are always risks.

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