Note, there could be option 3 whereas its fractional but a gov-owned central bank entity.
Where pure crypto exchanges get into problems with fractional reserves is loaning out, etc. via their own invented tokens. Why? Because then they are setting up themselves as Central Bank with their own Reserve without the power of printing money and other gov things to counter Bank runs.
FTX could have done less than stellar legal trading of FTT in bull market and would have still blown up as evidenced by some of the firms it acquired.
We are still at the original economic problem when a crypto exchange sets it self up as Federal Reserve
Yeah exactly, fractional reserve does not work without a well developed inter banking network provided by a central bank. That just means that fractional reserve banking is inherently instable and requires periodic bailouts.
Where pure crypto exchanges get into problems with fractional reserves is loaning out, etc. via their own invented tokens. Why? Because then they are setting up themselves as Central Bank with their own Reserve without the power of printing money and other gov things to counter Bank runs.
FTX could have done less than stellar legal trading of FTT in bull market and would have still blown up as evidenced by some of the firms it acquired.
We are still at the original economic problem when a crypto exchange sets it self up as Federal Reserve