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Money’s Edge: Will Greece Embrace Bitcoin, or What?

Whither Greece? Will it be booted from the European Union – mainly because Germany is losing patience with what it views as irresponsible public finance and downright lackadaisical national attitudes about taxes and debt?  And if it is booted from the Eurozone, will it turn to a cryptocurrency?By Robert McGarvey

Greece is a mess. It has billions of euros in public debt and no obvious way to service it. It is a small country – there are around 11 million Greeks – and the only real sources of income are tourism, agriculture and shipping. It’s wrestled with profound debt issues for a decade, and the fallout has taken down governments, triggered mass strikes, spawned huge street riots, and above all, shaken confidence in just about everybody that the Greek government has any clue about how to end the misery.

What would happen if Greece were booted from the European Union (it’s been a member since 1981)? Or, alternatively, if it were simply booted out of the Euro?

Cryptocurrency proponents believe they’ve got a bright future in Greece. Here’s a talking point you’re likely to hear from that crowd: plans are afoot to install some 1000 bitcoin ATMs around Greece, mainly in response to strict government controls on currency that limit withdrawals of euros by Greeks to about $66 daily. This is coupled with a flat out ban on putting money in foreign bank accounts. Shift money into bitcoin and just maybe those government limits can be dodged.

But Bitcoin is not the only cryptocurrency in play.

A Greek island – Agistri, close by the capital Athens – has said it plans to center its economy (mainly tourism based) around Nautiluscoin, a new cryptocurrency. Proponents of Nautiluscoin point to Ecuador’s dinero electronico, a crypto currency that co-exists in that South American nation as an official currency, along with the US dollar.

 

Could Greece pull off a full embrace of cryptocurrency? And if so, should it be market cap leader btcoin or a de novo cryptocurrency? The smart play for Greece, where currency is concerned, is to keep three goals in mind: Tourists need to be wooed, with good deals and at least the appearance of a settled society; Greeks themselves have to be encouraged to keep their wealth in the country and to keep spending per usual; and, lastly, the big international economic powers need to be placated.

Jeffery Born, finance professor at the D’Amore McKim School of Business at Northeastern University, said that he can see bitcoin as a temporary harbor. Were Greece to exit the euro, there would be skepticism of the idea that it could successfully introduce a stable currency – crypto or traditional – and that could justify worries that thrust people into adopting bitcoin just to keep the economy functioning.

Born added: “However, I suspect that other currencies are more likely to used in transactions by parties that don’t trust a new currency – the euro being the most likely candidate. It could serve as the de facto currency in Greece for years after a (potential) Greek exit from the eurozone.”

That is, Greece could be booted from the euro – but euros could remain the coin(s) of the realm for years, just as many countries now depend on the US dollar as their semi official currency.

Futurist Michael Vidikan, owner of FutureInFocus.com, is the admittedly rare futurist who is actually skeptical about bitcoin, at least where Greece is concerned. And for a bareknuckles reason: Greeks, he believes, would take a financial beating if they converted lots of Euros into bitcoin. He elaborated: “When they convert all of their euros to bitcoin, the price of bitcoin would surge to meet the new demand; and after the surge, many investors would sell, which would sink the price.”

That would leave the country and its people holding currency that was worth a lot less than they had paid.

“The reason Greece is exiting the euro is so they can devalue their currency,” Vidikan added. “They actually want their currency to be worth less so their goods and services become cheaper relative to other countries, this so they can export more and make it easier to pay off their debts.”

What’s next? Stay tuned. But odds are strengthening that Greece – a cradle of western civilization with a culture dating back 2500+ years – may become the first, er, first world nation to go all in on crypto.