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Embrace Safety Over Fractional Risk
Fully reserved banking offers a safer alternative to fractional reserve banking, exemplified by the issues witnessed with institutions like Silicon Valley Bank. While traditional banks can create credit through a fractional reserve system, this approach also poses significant risks to depositors. In contrast, stablecoin issuers that maintain full reserves could provide a more secure financial environment. However, the challenge lies in the trade-off between safety and the overarching need for credit creation, which is fundamental to economic systems. Central banks often oppose fully reserved banking as it restricts their ability to foster credit expansion necessary for economic stability.