<p>Banks <em>do</em> lend out more money than they have. This concept is referred to as <a href="http://en.wikipedia.org/wiki/Fractional_reserve_banking" rel="nofollow">Fractional Reserve Banking</a>. Government regulation is supposed to impose a minimum of reserves they need to keep, limiting the amount of money they may create.</p>

<p>The difference between Bitcoin users and banks is that banks can lend out more money than they have, because they can just increase the account balance of their customer, while adding a liability of the customer to their own bookkeeping.</p>

<p>Meanwhile, if a Bitcoin user lends bitcoins, for the borrower to be able to use them, he has to transfer actual bitcoins to the borrower. Unlike the banks' ability to increase different account balances at the same time, the Bitcoin lender cannot send the same bitcoins to different borrowers at the same time.
If however, the Bitcoin borrowers are satisfied by receiving a statement of liability from the lender, the lender could pursue Fractional Reserve Banking as well.</p>

CC BY-SA 3.0
2014-08-10T14:40:22.247Z
Do you mean that banks are free to increase their account as soon as customer promised to return a loan with %? My question actually is how does the government control (or other agent) that the bank does not print more money than it is permitted by low.
Val
CC BY-SA 3.0
2014-08-12T14:54:08.787Z
@Val: Governments control you, me and banks by carrying a big stick and pointing at the prisons they've built for people who do more than is permitted by law. You, I and the bank employees gave government that stick for that purpose.
RedGrittyBrick
CC BY-SA 3.0
2014-08-12T14:58:42.743Z
@RedGrittyBrick funny trolling. But, I would like to hear the answer still. Do you need me to repeat the question?
Val
CC BY-SA 3.0
2014-08-12T15:02:41.800Z
@Val: How about you put your "actual question" in your question post, so we that we may actually read your question before formulating an answer.
Murch
CC BY-SA 3.0
2014-08-12T15:43:49.667Z
@Murch Nice trolling. He has the question both in the OP and below this answer. But, we troll him asking to put his question into his question. Har-har! This @Val was really scorned today! How is question `what prevents banks from printing money` is different from `how do you control the banks not to print more money than they have/allowed to print`. Which one would you prefer to answer?
Val
CC BY-SA 3.0
2014-08-12T17:37:32.577Z
In the comments you are focusing on the relationship of Governments, Regulation, and Banks, while your opening post was addressing "financial cryptography experts", establishing a simile between banks and Bitcoin users, and inquiring about their ability to lend more money than is deposited with them. Apparently, I was trying too hard to find something in your question that was on-topic.
Murch
CC BY-SA 3.0
2014-08-10T01:53:04.103Z
2014-08-10T08:28:53.160Z
2014-08-10T08:28:53.160Z
Murch
<p>I understand that this is not appropriate question but it obsesses me for a long time (other forums do not give certain answer) and I think that finantial cryptography experts should understand this very well. I am interested to know what prevents bank to issue more money than it has on its deposits. Say, customers transferred 1000k dollars to bank. What prevents it to lend 100M as loans/withdrawals? I think that every bitcoin user is such banker and answer must be answered.</p>

CC BY-SA 3.0
2014-08-10T01:46:02.793Z
It is not clear how you arrived at the conclusion that every Bitcoin user is comparable to a bank. Also, it might be interesting for you to read up on [Fractional reserve banking](http://en.wikipedia.org/wiki/Fractional_reserve_banking).
Murch
<banks>
What prevents banks from printing electronic money?
Val
# What prevents banks from printing electronic money?

(Asked by: username_0 on 2014-08-09)

I understand that this is not appropriate question but it obsesses me for a long time (other forums do not give certain answer) and I think that finantial cryptography experts should understand this very well. I am interested to know what prevents bank to issue more money than it has on its deposits. Say, customers transferred 1000k dollars to bank. What prevents it to lend 100M as loans/withdrawals? I think that every bitcoin user is such banker and answer must be answered.

**Tags:** banks

> **Comments:**
> **username_1**: It is not clear how you arrived at the conclusion that every Bitcoin user is comparable to a bank. Also, it might be interesting for you to read up on [Fractional reserve banking](http://en.wikipedia.org/wiki/Fractional_reserve_banking).  

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## 1 answers

### Answer by username_1 on 2014-08-10. Score: 4

Banks *do* lend out more money than they have. This concept is referred to as [Fractional Reserve Banking](http://en.wikipedia.org/wiki/Fractional_reserve_banking). Government regulation is supposed to impose a minimum of reserves they need to keep, limiting the amount of money they may create.

The difference between Bitcoin users and banks is that banks can lend out more money than they have, because they can just increase the account balance of their customer, while adding a liability of the customer to their own bookkeeping.

Meanwhile, if a Bitcoin user lends bitcoins, for the borrower to be able to use them, he has to transfer actual bitcoins to the borrower. Unlike the banks' ability to increase different account balances at the same time, the Bitcoin lender cannot send the same bitcoins to different borrowers at the same time.
If however, the Bitcoin borrowers are satisfied by receiving a statement of liability from the lender, the lender could pursue Fractional Reserve Banking as well.

> **Comments:**
> **username_0**: Do you mean that banks are free to increase their account as soon as customer promised to return a loan with %? My question actually is how does the government control (or other agent) that the bank does not print more money than it is permitted by low.  
> **username_2**: @username_0: Governments control you, me and banks by carrying a big stick and pointing at the prisons they've built for people who do more than is permitted by law. You, I and the bank employees gave government that stick for that purpose.  
> **username_0**: @username_2 funny trolling. But, I would like to hear the answer still. Do you need me to repeat the question?  
> **username_1**: @username_0: How about you put your "actual question" in your question post, so we that we may actually read your question before formulating an answer.  
> **username_0**: @username_1 Nice trolling. He has the question both in the OP and below this answer. But, we troll him asking to put his question into his question. Har-har! This @username_0 was really scorned today! How is question `what prevents banks from printing money` is different from `how do you control the banks not to print more money than they have/allowed to print`. Which one would you prefer to answer?  
> **username_1**: In the comments you are focusing on the relationship of Governments, Regulation, and Banks, while your opening post was addressing "financial cryptography experts", establishing a simile between banks and Bitcoin users, and inquiring about their ability to lend more money than is deposited with them. Apparently, I was trying too hard to find something in your question that was on-topic.  

---

