Why are customer deposited considered “assets” ? Is the money in my checking account included in the assets for my bank?
My stock broker and the NYSE can't secretly sell my shares and loan out the proceeds. They just hold the stock.
That Crypto "exchanges" think of deposits as assets makes it clear they're more like a hedge fund than a bank or exchange.
The hard distinctions between different types of financial institutions and their services, and most particularly the thing that makes every thing that holds money or other valuables on your behalf not effectively, like a (very sketchy) bank, are mostly a product of regulation.
Not in the business so I could be wrong but I believe they can loan shares to short sellers to sell and pocket the interest but they are also regulated which turns out is important.
Banks work a bit differently, btw, they should also have more $ assets than liabilities, but there's generally no direct 1:1 link as described above.
The total difference between assets and liabilities is the common stock (equity). This also shows why it's a very bad thing when the stock of a bank goes to zero, it means some liability will not be covered and thus the bank can be considered bankrupt. I'm simplifying here.
From this point we can take a history tour to the 2008 meltdown, when we had this situation everywhere: bank A would short the common stock bank B because bank A had a lot of assets in bank B (which show up in bank B as liabilities). Bank B did the same thing to bank A for the same reasons. This is not as stupid as it sounds, because banks are not the only players in capital markets, using those shorts they essentially spread the default risk all over the equity markets. While this whole clusterfuck of nobody-trusts-nobody is going on the SEC comes out all of a sudden and bans the short sale of bank stocks, because shorting is evil or something. Imagine how much that made things worse after the only way to hedge entire banks going under was suddenly removed.
How are we not supposed to interpret their lack of doing so as “hiding something ugly”?
Correct, they should be parked in an escrow account on which the exchange has limited control. Also, such accounts are monitored by third party auditors, banks as well as government regulators. At least that’s how it’s in India.
yes there is, its accounting.
The money in their vault is an asset, the balance in your account is a liability. When you deposit money, it creates both, though the asset by design doesn’t sit there for long in that form.
The assets are then used to create revenue and anything that has to be paid to the depositor are expenses.
When the deposit is withdrawn, the asset and the liability both decrease.
The full term is Assets Under Management so it's semi-understandable, but yes definitely not correct.
It's just a custodial wallet solution until a position is opened by the customer and even then Binance doesnt trade anything on their behalf.