> Looking back to the financial history of the 1800s, it seems to be the case that it is only the massive intervention of government beginning in the 1900s and especially after the Great Depression -- in particular aggressive regulation and oversight, central bank systems, deposit insurance -- that prevents perennial banking failures.

This is a complete misunderstanding of the US banking system history.

The reason the US banking system was totally screwed up after the Civil War was because of a few major regulations. Most importantly not allowing branching. So the US literally had 10000s of banks that were incredibly small and not deversivied. And it gave NY banks a monopoly on foreign market stuff forcing all the smaller banks to deal with the NY banks creating a pyramid structure.

And then combine that with a monetary system that forced banks to back notes with US government bonds (raising money for the civil war). Guess what happened after Civil War, the US paid back debt (yes I know, crazy to think) and this basically created a constant deflationary pressure.

This is literally as if somebody had designed a system to implode, and guess what, it did, repeatably.

This was actually well understood by many back then. And the solution was also clear. Don't force banks to back notes with US government bonds (or alternatively stop reducing debt). And allow banks to operate beyond their local economy.

These changes went before congress multiple times. It was rejected each time because of lobbying. The small unit banks didn't want to compete against each other, and the NY banks didn't want to give up their privilege position in the market. Support came from the medium sized banks, in other cities like Chicago.

So it was basically a alliance of the very small banks and the very large banks that locked a horrible terrible system into place. Rural and NY teamup FTW. This system lead to repeated massive waves of bank failures and it lead to the 'Free Silver' movement and famous things like the 'Cross of Gold' speech. Ironically William Jennings Bryan was also against the actual solution to the problem we was complaining about, go figure.

This can be observed by comparing the US to Canada. During the same period Canada had no massive waves of bank failures. Canada had always allowed these things (in fact, the suggestion in the US were inspired by Canada). So in Canada you have larger banks that operate in the whole country and they were backing notes with general stocks not just government bonds. Canada had basically no bank failures, not even during the depression, even while the depression was quite deep in Canada (given their trade with the US) and Canada didn't even have a central bank during that time. And just minimal regulation in general (but it has to be said that these cooperation didn't hae all the rights of cooperation today).

This deadlock was then basically 'resolved' at least in theory by creating the Fed in 1913. The reason this was managed is because it basically the Wilson Administration bought off the NY banks by giving them even more power. And it bought of the small banks by not changing any of the unit banking laws and buy not giving all power to NY (hence the strange structure of the Fed). In practice of course NY actually took control and that's where actual policy decisions were made for the early history)

Problem was just, Fed didn't even remotely solve any of the actual problems and was a totally incompetent institution. Issues with the banking system persisted, the Fed didn't actually improve anything. They had the power to fix some of the issues, but they weren't competent enough to actually do it.

That meant that during the Great Depression the US still had 10000s of weak banks and didn't have an efficient system to provide liquidity. Its hard to say if the Fed made things worse or not. And this time the deflationary pressure came from all the dumb shit central banks were doing at the time (namely France and US gold hording) rather then from US debt retirement. But its the same effect. This lead to many 1000s of bank failures.

In this total shitshow post Great Depression FINALLY a law was passed to end the insane unit banking laws. The US still had far to many banks really. FDIC was introduced and that certainly helped to perpetuate that system. FDIC is overwhelmingly the reason failure are not as common anymore. The other reason is that central banks actually figured out that collapsing the money supply isn't a great idea.

Its kind of funny that people use this history to say 'see we need regulation and complex government insurance programs', when in reality the US was a total basket case with horrible banking regulation that distorted the whole market and build a insane unstable pyramid that fell over every 10 years. While Canada had very few regulation beyond contract law and had almost a perfect history of bank operations.

> So really, it appears to me that crypto is merely an immature financial system that is learning the lessons of legacy finance in an accelerated fashion.

The issues in crypto and historical bank operations are not the same at all. Most crypto are independent systems that mostly try to use marketing to hype up their chain current holder increase in value. Its all about tricking people into believing in a new fiat currency and asserting that it has value. All the requires is social media. Normally having a fiat currency, requires the whole having an economy, army and other institutions. Arguably the software ecosystem around a cryptocoin is what makes it value.

Historically banks weren't allowed to be 'peers' in crypto terms until they had proven capital requirements (this is just self interest for the banks, they didn't want to get stuck with notes from banks that didn't have capital). Only if a bank had that and was considered basically competent were they allow into the clearing house operations. And in the clearing house you could then see if a bank had consistent capital outflow. If a bank was a bad actor that seem to have to much capital outflow, the could be cut of from the system early and liquidated when they can still pay of most of their debt.

So really I don't see many parallels here at all. Historical bank failures overwhelmingly were connected either to local conditions (famines mostly) or to systematic problem with the organization of the monetary system (US debt reduction, Great Depression) or occasionally you had banks just make to many bad investment and go under (and that isn't a systematical problem, that's just expected market outcome).

The issues in crypt currency are don't really fit either of these patterns.

In crypto you either have pump-and-dump. Or you have just straight up hacking. Of course robbery was already an issue back then, you just didn't have the internet. And pump-and-dump in crypto works because of social media and a gigantic addressable market.

The difference is in crypto this stuff isn't reversible and there are few limits of what can be done. While in the real world the system is more manual and has more checks so hacking a bank and stealing all its money just isn't that easy. But these fallbacks and limitations are there just for practical and historical reasons.