Traditional banks take deposits of USD, loan them out using fractional reserve, and fail if depositors all simultaneously run to the bank and close their account. Banks need loans to pay operating costs (I suppose) so any economy (specifically, currency) with loans going on will need deposit insurance, i.e. all banks will eventually end up subsidiaries of a single enormous bank - the Federal Reserve.
MtGox does not do loans. In fact, BTC loans are so risky that no large scale lending happens in BTC. Unless MtGox embezzled funds or shredded BTC (see below), they will ultimately have the ability to honor all payment requests and _still_ have their profits.
It is possible they've had some sort of error which has irretrievably sent BTC to random addresses where it can't feasibly be recovered. If this is true, they should say so.
On their USD side, they are struggling and may have chosen to use some BTC deposits to generate USD funds to accelerate payouts. However, I find this unlikely since their USD payout problem has only gotten worse. I may be wrong; if MtGox is trying to play with their deposits, they should say so.
In other words, check your assumptions. And MtGox of course has always had a problem with communication.
MtGox does not loan out currency. Unless they've embezzled funds or shredded BTC (see below), they will ultimately have the ability to honor all payment requests and _still_ have their profits.
Or unless they were hacked, and simply don't have the BTC anymore.
> if MtGox is trying to play with their deposits, they should say so.
That's the problem with unregulated "banks", they don't have to say anything and they can for example pay all the money for themselves as for example "bonuses" or salaries and then go bankrupt. There is no protection for assets at "banks" like mt. gox.
Banks (in the US) don't loan out deposits; deposits are the cheapest source of reserves used for settlement, but the actual loans themselves are created ex nihilo [1].
This is kind of the central point of why we no longer experience bank runs in the broader economy, and why Bitcoin will always be vulnerable to them.
Does anyone know whether Gox keeps 100% of deposits in reserve?
In a somewhat similar situation-- online poker, where poker sites took deposits in a wildly unregulated space-- Full Tilt Poker only kept a small amount of deposits on hand and paid out much of it to insiders.
I'm probably oversimplifying this or missing some crucial step but...
All your users by BTC at i.e. $10 and store them on your (Gox) exchange. Price jumps to +600 and you subsequently get 50k fiat withdrawal requests. Am I a total cluebie to wonder how they can fund such withdrawals? Maybe there isn't sufficient capital reserve or liquidity between BTC and fiat to withstand such demand?
* User deposits USD/EUR/etc into an exchange (such as MtGox)
* User places a "bid" to buy BTC at a certain price (USD/EUR/etc per BTC)
* User waits for their "bid" to be matched by the exchange to another user who has placed an "ask" to sell their BTC for USD/EUR/etc
So, the USD/EUR/etc being exchanged between users in an exchange is put there first by the users. The exchange itself does not front USD/EUR/etc; or at least it shouldn't.
