The past year has certainly seen more financial institutions adopt Bitcoin as a reserve asset, either for themselves or for their clients. Several news outlets have reported that BNY Mellon will hold, transfer, and issue Bitcoin on behalf of its clients. The use of the word issue raises the question as to whether they will be undertaking fractional reserve banking on top of a deflationary finite asset, and what the consequences would be for them and for Bitcoin. Could a lot of people thinking they own Bitcoin at a bank when all they have is an entry in the bank’s accounting ledger cause the perceived supply of Bitcoin to be expanded greatly?
Fractional Reserve Bitcoin?
