Nick Szabo, the cryptographer and digital currency researcher who many believe to be the real identity behind Satoshi Nakamoto, has published new research in a blog post exploring how bitcoin may help Greece avoid an ultimate financial meltdown.
The ongoing financial crisis in Greece is becoming more aggravated and the country’s accumulated debt has surpassed 175% of the nation’s GDP. The root of the current Greek financial crisis, explains Szabo, lies in the fact that the Greek government has spent 75% more than the GDP generated with its economy.
How Bitcoin Could Help
Bitcoin’s main advantage is its potential use case as an international borderless payment method for investments and assets overseas, and to “substitute for cash or other substitute currencies in a money-starved environment,” Szabo states.
Bitcoin, however, will not help the Greeks from withdrawing money out of their frozen bank accounts, he said. For the Greeks to avoid the current capital controls environment, they will have to prevent themselves from using “Greek-based-fiat-bitcoin” exchange “to futilely try to tap into their frozen bank accounts.” Szabo explained:
“To have value as a medium of exchange, bitcoin must be taken up by a community of people who already frequently trade with each other, and who have a strong need to use it in these trades. It is especially important to market to the links in the cycle that have the strongest negotiating leverage with the others (in the case of [...] the Greek store scrip cycle, the store and its larger suppliers).”
Bitcoin could also help with the emergence of cross-border commerce issues. For example, exporters and freelancers can introduce the digital currency to the country, to avoid its payments from being locked up in frozen bank accounts which cannot be withdrawn or simply cannot be used.
Bitcoin could also be used by importers pay for goods instead of other electronic payment platforms like PayPal and credit cards, since the accounts are frozen and cannot be transferred abroad.
The Effects of the Banks’ Decisions
To cover up its excess expenses, the government has borrowed money from its neighboring nations, piling debt on more debt each year. With the fear that the crisis may potentially lead the nation towards a full economic collapse, Greek banks have set plans for a “bail-in” to confiscate a certain percentage of unsecured deposits.
As previously reported by Cointelegraph, the Greek banks announced on July 4 that they will withdraw at least 30% of deposit accounts with balances as low as 8,000 euros. The announcements have caused the Greeks to rush to ATMs and banks to withdraw all of their savings if possible.
However, the Greeks were limited to withdrawing 50 euros per day, and with the bank accounts frozen, businesses have stopped accepting debit cards. Furthermore, the banks have banned the use of credit and debit cards out of the country, which ultimately forced the country to be ejected from the pan-European money settlement system, disallowing Greek business to pay for imports and resulting in the rejection of many shipments into the country.