🌟 How do banks make money?
1/ You visit the loan officer at the bank to request a loan.

2/ The loan officer asks you for papers and documents.
You submit the mortgage and other required documents.

3/ After analyzing your application, the bank offers you different plans and conditions.

4/ You agree to one of the plans, and the bank provides you with loan agreements based on the agreed upon plan.

5/ When you receive the loan agreements or contract papers, you sign them. Suppose the loan amount is $100,000.

6/ The moment you sign the loan agreement for $100,000, that document becomes a bond or a promise from you to repay $100,000 plus interest in the future.
In essence, that paper turns into the financial market.
The core business of a bank revolves around buying and selling securities.

7/ The bank buys the bond/guarantee/promissory note from you for $100,000 today.
You are the issuer/seller/borrower, while the bank is the buyer/lender/creditor.
When the bank buys this security from you, it takes action.

8/ First, when the bank owns the bond, it becomes an asset for the bank.
Therefore, the bank adds the $100,000 in bonds along with its assets on the balance sheet.
For the balance sheet to remain in balance, when assets increase by $100,000, there must also be a $100,000 increase in liabilities/equity.
Assets = Liability + Equity.

9/ Here, bank deposits are considered obligations of the bank, as it is obligated to pay them.
Then, the bank recently added $100,000 to your bank account.
10/ This newly created deposit is just a digital entry, not originating from any other account.
It was created at that moment by the bank.
This process is known as credit creation, and is a routine practice for commercial banks every time they issue a loan.
Nearly 97% of money exists as credit, while only 3% is cash/coin, which we commonly refer to as money.
Banks, especially commercial banks, do not lend money.
Instead, they create money out of nothing with every loan, whether it's $500 to an individual or $100 million to a company.
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Amid mounting complaints, cryptocurrency expert Adam Cochran suggested in a post that Coinbase imposes these types of restrictions in multiple situations. First, if the exchange detects a potential account breach that could indicate a breach, it will impose restrictions to protect user funds. But it could also happen when a potential Know Your Customer (KYC) and Anti-Money Laundering (AML) violation is observed.
He notes that while these measures may seem inconvenient, legitimate accounts typically resolve these issues without difficulty. The expert highlighted that extended lockouts often occur when users repeatedly interact with tokenized addresses on the blockchain.
Cochran reported that such issues can also arise when users make purchases using a credit card with a long redemption period. They may face withdrawal restrictions if they do not have a consistent history of purchasing with that card on Coinbase.
Another case is where accounts that have initiated previous redemptions may face withdrawal reductions on new credit card purchases until the settlement date passes.
He added that one of the challenges surrounding KYC/AML policies is the inability to disclose the specific reasons for account restrictions in certain jurisdictions. This lack of transparency can frustrate users.
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