Bitcoin cannot be fractionally loaned out - if a bank has BTC in reserve and loans it, the transaction goes through and the bank has that much less in reserve. Say they have 100BTC in reserve, and I want a 10BTC loan: they can't just issue a piece of paper saying "here's 10BTC" and only reserve 1BTC (10%) to cover it, they have to transfer the actual amount. So, they can't loan out 10x what they have and profit from the multiplier when collecting interest. They can't pyramid-scheme their way into a major financial bubble. I love this aspect of bitcoin, it neuters the parasites.
> So, they can't loan out 10x what they have and profit from the multiplier when collecting interest.
Sorry, you don't know how a bank works. The bank will borrow from someone else - depositors, other banks. The reserve requirements is how much of their own money they need to have to cover loans, and is a protection against risks, it does not imply that the rest of the money they hand out have been created out of the blue.
Yes, they will collect based on leveraging their capital, borrowing money at lower interest, and profiting from the multiplier.
But as to your scenario where the bank just hands out papers saying "here's 10BTC": In fact, you can already speculate on margin, on Bitcoin by buying Bitcoin CFD's (Contracts for Difference). CFD's means you're never actually owning the underlying security at all (and in fact there's no technical reason why the company you enter a contract with needs to ever own any at all either; whether there are legal reasons may depend on jurisdiction) - you're just, as it says, entering into a contract where you're putting up some cash now to be paid the difference in value over a time period.
I have an account with a company that would me buy Bitcoin CFD's with a 15% margin if I'd like. Meaning for $15, I "get" $100 worth of "here's some bitcoin" "paper" - if those $100 worth of BTC increase to $110, I can sell and get $25 back. Conversely, if they drop to $50, I'd get a nasty margin call to pay the $35 difference.
