Why would banks and exchanges need to pause withdrawals if they’re in financial trouble?
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Basically, banks use your money to lend to others to make more money. If you deposit $10,000, and Billy wants to borrow $2,500, I can take that from the money you deposited and lend to Billy and charge him interest. As longs as you don’t come and ask for more than $7,500 before Billy has paid it back, I’m a happy banker. But perhaps Lisa has also deposited $10,000, so even if you do ask for your $10,000 back, I can use $2,500 of what Lisa deposited to make up the difference. As long as I don’t lend too much, and the more customers I have,, the less likely I’m going to be caught out without enough money to cover people’s withdrawals. But if something happens in the economy, and everyone panics, I could be in trouble.
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