Reply to Binance and FTX

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[quote=Anonymous][quote=Anonymous]People are confusing the question of whether decentralized cryptoassets like bitcoin are a worthwhile store of value or investment with what happened with FTX.

You can buy or sell crypto without an exchange as it was down in the earlier years of bitcoin and you can store it offline on a hard drive that you guard like a bar of gold.

An exchange, however, makes it much easier to buy and sell and, in principle, you don't have to worry about safeguarding the bitcoin you buy there because the exchange safeguards it for you.  In highly regulated exchange arrangements, this safeguarding is generally done through an arrangement with a highly regulated bank or broker dealer.

This did not happen with FTX because, as an exchange, it was very lightly regulated and it, not a bank or broker dealer, was the custodian of customer assets.  The owners of the exchange lent customer assets to a struggling trading affiliate, which immediately lost them on their bets and could not recover sufficiently to return the customer assets to the exchange.

The problem here is what the owners of the exchange did with customers' cryptoassets, not the cryptoassets themselves. It is a repeat of a crime we have seen over and over again over the decades in which a trustee pilfers the assets they are supposed to be protecting.

Whether decentralized cryptoassets like bitcoin et al are worthwhile stores of value or investments is a completely separate question, the answers to which shed no light on what happened in the FTX blow up, which just as well could have involved stocks, or foreign currencies, or pork bellies.

If you believe it does, you will miss the real lessons of FTX.[/quote]

When you opened an account with FTX part of the contract agreement is that your personal assets could be loaned out.  I doubt many people read the opening contract documents.  This part of the contract is available on line.[/quote]

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