Operating a cashu or fedi mint with insufficient bitcoin backing isn't fractional reserve, it is theft. Fractional reserve lends out reserves, and those loans are assets held by the bank. Fractional reserve isn't technically theft because your account deposits are seen as loans to the bank.
Replies (3)
This is what I was trying to articulate.
A mint can print more tokens into existence expanding the total amount of ecash that's supposed to be pegged to sats. Its only detectable if there's a deep enough bank run.
As mints compete with lower fees and more services, the incentives lead to lending out more ecash than available in the reserve. Yes, this is theft and will be aparent when people run off the mint all at once.
I'm making the point that "fractional reserve" isn't considered theft as long as the bank is only lending out reserves against debt that their debtors are current on their loans. This is why "free banking" technically isn't engaging in theft.
