As the world watches nervously, Greece, under pressure from the European Central Bank, takes the serious step of imposing capital controls: Banks are closed, ATM withdrawals are limited and funds cannot be sent out of the country.
Capital controls will be in place at least until July 7 after Sunday’s citizens’ referendum that will ask Greeks if they want to remain in the European Union and accept their creditors’ terms.
Will Bitcoin benefit from the current crisis?
There’s lots of speculation that the rate of adoption of digital currencies may increase more rapidly as a result of the current crisis in Greece.
CNN makes the case noting:
“The world’s largest Bitcoin exchanges tell CNNMoney they’ve seen a surge of business from Greece.” and
“Ten times as many Greeks are registering to trade bitcoins on the German marketplace Bitcoin.de than usual, according to CEO Oliver Flaskaemper. Bitcoin trades from Greece have shot up 79% from their ten-week average on Bitstamp, the world’s third-largest exchange.”
In an article on CNBC , Brendan O’Connor, CEO of digital currency-specialists Genesis Global Trading says:
“(Bitcoin) had been middling around the $235-245 range for several months, and all of the sudden this crisis escalates and you’ve gotten yourself a nice 10-point pop…Greece was likely the only factor behind the digital currency’s upward momentum.”
Daniel Roberts, writing in Fortune Magazine, disagrees and makes the case that the small spike in the price of bitcoin would have happened anyway:
“There may be a growing global interest in purchasing bitcoin that is coinciding roughly with the Greek crisis — the currency’s 2013 mega-spike coincided with a similar financial crisis in Cyprus — but the hike this summer began before the situation grew so dire in Greece.”
Eli Dourado, a research fellow at the Mercatus Center at George Mason University says:
“I think we are seeing a boomlet in global demand as a hedge against any kind of uncertainty, not just [the uncertainty] in Greece. I think the value of the concept is being affirmed.”
As Bitcoin Magazine reported yesterday, there are indications that some Greeks have been buying up bitcoin for some time now.
For Greece’s European neighbors, particularly in Italy, Spain, Portugal and even France, there is growing anxiety about the effects of Greece defaulting on the euro and the subsequent impact on the value of the euro and their savings.
In the wake of such economic uncertainty, it would seem more likely that Europeans will be looking more closely at digital currencies as an alternative to fiat currency.
Capital Controls for Cyprus – So How Did That Work Out?
In 2013, Cyprus was near bankruptcy and the ECB and IMF had proposed a deal that would see banks in Cyprus lose substantial funds. These caused a run on the banks, and the government subsequently imposed capital controls.
This devastated Cyprus’s economy, and the controls remained in place for almost two years with the last restrictions lifted in April 2015.
In a recent article in Bloomberg Business, Katia Porzecanski says about imposing capital controls: “Unfortunately for Greece, history suggests it hardly ever works.”
“While dozens of countries from Mexico to Iceland and Thailand have imposed such measures since World War I to boost revenue, prop up currencies and hold down interest rates, the International Monetary Fund found that only those few with sound economies and strong institutions succeeded in slowing capital flight.”
Some Bitcoiners weigh in on the crisis
When Andreas Antonopoulos was in Toronto earlier this year he told the audience:
“I often get asked why I don’t recommend Bitcoin as the answer to Greece’s economic problems. I tell them the citizens of Greece should have the choice to use both digital currencies and fiat currency. Bitcoin alone isn’t necessarily the answer but it can be part of the solution.”
If people in Greece want to use bitcoin, they can and will. All these calls for bitcoin as a “solution” for Greece miss the point of bitcoin
— AndreasMAntonopoulos (@aantonop) June 22, 2015
Erik Voorhees, CEO of ShapeShift.io, sees a huge opportunity for bitcoin in the current crisis. In a series of tweets yesterday, using ChangeTip, Voorhees gave away $5 in bitcoin to people concerned about the future of the euro.
Banks frozen in Greece? Try Bitcoin instead… here is $5 @mtvgreece $5 @ChangeTip #GreeceBitcoinDrop #grexit #euro #eurozone
— Erik Voorhees (@ErikVoorhees) June 29, 2015
Roger Ver is also optimistic that bitcoin can only benefit from the current situation:
Thanks to the invention of Bitcoin, the era of government caused misallocation of resources due to manipulating money will soon end. #Grexit
— Roger Ver (@rogerkver) June 29, 2015
Traumatic as the current economic crisis is for Greece and Europe, this may be an unprecedented opportunity for bitcoin to “take it to the next level.” As the old saying goes: “When one door closes, another door opens,” and the open door may be a brighter future for digital currencies.