Why would banks and exchanges need to pause withdrawals if they’re in financial trouble?
In: 101
They don’t have the money.
You deposit 100, they lend 80 of it. 20 bucks are at high risk, 60 is loaned against stable assets. Now assume they do this for all depositors and they all decide they want their money back at once. The bank will need to borrow the money themselves OR demand immediate repayment of all loans in full. And forcing everyone to sell assets to repay loans will immediately sink the economy.
And now assume they lend 80 and 20 bucks are against secure assets and 60 is high risk. In troubling times, risky banks can quickly fail.
Now these are very simplistic examples and modern banking can be much more complex and extreme. But this is one example of why it might happen.
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