I recall spinning this theory on another hn thread [1]. And sure, you are correct that Mt Gox didn't make loans, didn't act exactly in all respects like bank. But the literal term "fractional reserve" is certainly suggestive of what both a standard modern bank does and what a crocked bitcoin exchange could do - only keep a small amount of money to satisfy inflows and outflows while doing something else with the rest of the money entrusted with it. If Mt. Gox did this, they clearly weren't responsible in doing it since don't have the money entrusted to them. But it pretty much seems like this lack of responsibility would be what distinguishes a failed bitcoin exchange from an ordinary banks.
Consider, Wikipedia says: "Fractional-reserve banking is the practice whereby a bank retains reserves in an amount equal to only a portion of the amount of its customers' deposits to satisfy potential demands for withdrawals. Reserves are held at the bank as currency, or as deposits reflected in the bank's accounts at the central bank. The remainder of customer-deposited funds is used to fund investments or loans that the bank makes to other customers." [2]
Which is to say, a fractional reserve system involves keeping only some money handy and hoping that the money you remove for other purposes goes on to make more money. Now, if you don't tell people you're doing this, then yes it's fraud. Secretly operating something that people don't think of as a bank, as a bank, is fraud. Lose the money you've invested and a fractional system collapses, whether you are openly operating as a bank or secretly operating as a bank. Secret banks do tend to collapse more often just 'cause they're shady. But the secret banks that make money, well you don't hear about them most of the time.
I recall spinning this theory on another hn thread [1]. And sure, you are correct that Mt Gox didn't make loans, didn't act exactly in all respects like bank. But the literal term "fractional reserve" is certainly suggestive of what both a standard modern bank does and what a crocked bitcoin exchange could do - only keep a small amount of money to satisfy inflows and outflows while doing something else with the rest of the money entrusted with it. If Mt. Gox did this, they clearly weren't responsible in doing it since don't have the money entrusted to them. But it pretty much seems like this lack of responsibility would be what distinguishes a failed bitcoin exchange from an ordinary banks.
Consider, Wikipedia says: "Fractional-reserve banking is the practice whereby a bank retains reserves in an amount equal to only a portion of the amount of its customers' deposits to satisfy potential demands for withdrawals. Reserves are held at the bank as currency, or as deposits reflected in the bank's accounts at the central bank. The remainder of customer-deposited funds is used to fund investments or loans that the bank makes to other customers." [2]
Which is to say, a fractional reserve system involves keeping only some money handy and hoping that the money you remove for other purposes goes on to make more money. Now, if you don't tell people you're doing this, then yes it's fraud. Secretly operating something that people don't think of as a bank, as a bank, is fraud. Lose the money you've invested and a fractional system collapses, whether you are openly operating as a bank or secretly operating as a bank. Secret banks do tend to collapse more often just 'cause they're shady. But the secret banks that make money, well you don't hear about them most of the time.
[1] https://news.ycombinator.com/item?id=7343986
[2] http://en.wikipedia.org/wiki/Fractional_reserve_banking