> Basically, Mt. Gox would be operating with fractional reserves.
I would not call what happened to Mt. Gox "operating with fractional reserves."
In a normal financial system, fractional reserve banking means that a bank retains X% of its customers' deposits as a "fractional reserve" while lending out the rest to other customers, often with either collateral (home, auto) or high interest rates (credit cards) to mitigate the risk of nonpayment. In this case, the bank can balance its asset (loans) and liabilities (deposits) balance sheet.
In Mt. Gox's case, they simply lost the bitcoins they were supposed to safe keep rather than making loans or anything like that, and are thus insolvent.
I would not call what happened to Mt. Gox "operating with fractional reserves."
In a normal financial system, fractional reserve banking means that a bank retains X% of its customers' deposits as a "fractional reserve" while lending out the rest to other customers, often with either collateral (home, auto) or high interest rates (credit cards) to mitigate the risk of nonpayment. In this case, the bank can balance its asset (loans) and liabilities (deposits) balance sheet.
In Mt. Gox's case, they simply lost the bitcoins they were supposed to safe keep rather than making loans or anything like that, and are thus insolvent.