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Comment by bodhibyte | Hacker News Reader

Both Wealthfront or Betterment are not banks but offer high-interest cash accounts that are FDIC insured. I've been curious what would happen if your money disappears from one of these high-interest cash accounts since they are technically not banks.

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Reading through Betterment's disclosure acknowledges the scenarios for potential loss. While the deposits are stored through their program banks, you're guaranteed up to $2mm in FDIC insurance. So if those banks go under, your money is as safe as it would be anywhere else.

What I did not know is that FDIC insurance doesn't apply while money is being _transferred_ between accounts (SIPC insurance apparently applies here).

Neither Wealthfront nor Betterment appear on the FDIC’s own list of insured institutions, so my guess is that if something wrong your money could disappear between the cracks, as in the example in the article.

https://banks.data.fdic.gov/bankfind-suite/bankfind

There are very strong guarantees of that not to happen.

Wealthfront and Betterment are tiny compared to others, but share the same field with the big players who have interest to not make people scared shitless.

It is the fast and loose, innocent because proving guilt is an effort, fintech I am sacred of: crypto, binary options etc.

The whole point of Bitcoin was to not need banks. You can be responsible for your own money. You can use a secure hardware wallet (with backup seed in a secure vault) and not have to worry about FDIC insurance. But most people seem to prefer risking all their money with an unaccountable third party over these relatively easy security measures. So now we have uninsured crypto banks. I get how this happened but it's kinda sad.

What is the advantage of not having to worry about FDIC insurance? Assuming, that is, that your funds on deposit do not exceed their limits.

> The whole point of Bitcoin was to not need banks.

I don't know man the fact that 0.0000000000000001 quectoseconds after the first bitcoin was mined all of the techbros set up exchanges so they could cosplay as Gordon Gekko while rubbing their nipples and moaning "arbitraaaaaaaaage" kinda calls this into doubt.

Anyone who thinks the typical consumer has the ability to operate/secure/assure a bitcoin wallet to a level equivalent to or better than a bank is delusional: there are crypto founding fathers who have been burned.

To exercise great opsec, one would have to be a psychopath. Most folks aren't, hence at least in the US, banks aren't allowed to excuse themselves by customer's lack of opsec ("regulation E").

The effective monopoly that banks has gotten isn't free to them, even if they do try very hard to avoid paying the cost asked.

What makes those different from the examples in the article?

Wealthfront partners with Greendot. I believe deposits are FDIC insured thru Greendot.

https://support.wealthfront.com/hc/en-us/articles/3600441608...

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