Yesterday, Bitcoin Magazinereported that Greece had closed its banks and imposed capital controls to prevent financial chaos after the breakdown of bailout talks with its international creditors. The decision came at the end of a weekend that brought Greece closer to “Grexit” – the potential exit from the Eurozone and perhaps the European Union (EU) itself – and confronted Europe with a serious crisis.
Today, Jose Pagliery, the author of “Bitcoin - And the Future of Money,” reports on CNN Money that Greeks are rushing to bitcoin. The article includes testimonials from top bitcoin exchanges such as bitcoin.de, Bitcurex, and China-based LakeBTC, stating that they are seeing a surge of business and inquiries from Greece.
This is, according to Pagliery, a pivotal moment. “Bitcoin was created as an independent, computerized money in 2009 to provide a stark alternative to government-issued currency held at banks,” he says. “This could be its moment to shine.”
The introduction of capital controls is likely to push people, not only wealthy investors but also ordinary people, to the conclusion that governments and banks couldn’t be trusted with their hard-earned savings. They may then start looking for alternative ways to store their savings, out of reach of predatory central banks, and choose bitcoin as the best alternative.
With limited access to their bank account and no legal way to transfer money abroad, the Greeks are likely to experience difficulties in buying bitcoin at the moment. But while it’s late for the Greeks who waited until now to act, other less optimistic Greeks have been buying bitcoin for some time now. In other countries, especially in neighboring European countries with troubled economies, it seems likely that people will begin to realize that the government can – and will – impose capital control and cut them from access to their savings if the economic situation worsens.
Based on real-time reports collected by The Wall Street Journal, Zero Hedgenotes that the contagious fear of capital controls may already be spreading from Greece to neighboring Italy. Several Italian banks reportedly failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most.
Sales orders on Italian stocks, in particular financial stocks, piled up before the market opening. At the start, the sales orders were so numerous that the system couldn't manage to process them, something that often happens when specific news causes a sell-off on a stock.
Speaking to Italian daily La Stampa, University of Chicago economist Luigi Zingales noted that a psychological contagion could spread immediately to Italy, because the Italian economy is not growing. “The question is: Would [Italians] too think to withdraw their money from the banks or not?”
La Stampa also reports that “The Bitcoin fever rises in Greece,” and mentions the recent April Fool’s joke of Greek Finance Minister Varoufakis: “Greece Will Adopt the Bitcoin If Eurogroup Doesn’t Give Us a Deal.” La Stampa describes similar scenarios as “unlikely, but potentially disruptive for Western economic culture.”