Nick Szabo, who many believe is actually Satoshi Nakamoto, has weighed in on the on-going Greek financial crisis and offered an interesting analysis. While some people have been calling for bitcoin to essentially become Greece’s national currency, and others are already writing bitcoin off as useless for the struggling southern European country, Szabo believes bitcoin could help facilitate trade as the traditional financial grinds to a halt.
This past Sunday, the Greek people rejected the European Union’s austerity measures in a nation wide referendum, setting up a showdown with the rest of Europe. Whether or not you agree with their choice, the Greeks have possibly paved the way for an exit from the Eurozone. At the very least, the days ahead are going to prove tense as Greek and European authorities try to salvage some sort of deal.
The Greek government has buried itself under billions upon billions of dollars worth of debt, more than $350 billion in fact, and is scheduled to make multi-billion dollars for decades to come. Payments in some cases could exceed 13 billion euros, which is a lot of money for a country that has a nominal GDP of less than $240 billion dollars.
Now, the Greek government is facing a severe funding shortfall, and with further loans from the European Union appearing to be increasingly unlikely, the government will likely struggle to raise funds. In fact, according to Szabo, the only place the government will be able to raise funds is from the Greek banks themselves. In order to raise funds the government will have to give the Greek people a “haircut”, meaning the government will simply confiscate portions of peoples’ savings.
Owing to the high risk of such a hair cut and other forms of capital controls, many Greeks have already pulled their funds out of the country and its banks. Those with money still left in banks are able to withdraw only 60 euro a day from ATMs, while debit and credit cards have been frozen. As you can imagine, this has created a host of problems: Plummeting consumer spending, difficulty paying for imports from the rest of the European Union and abroad, businesses unable to make vital payments, etc.
The breakdown of trade could send Greece into a deeper depression than it’s already in. One possibility, and one that Szabo is pushing, is the use of bitcoin to facilitate trade. While some businesses have shied away from bitcoin due to fluctuations in value, the all-digital currency is starting to look pretty stable compared to the euro, and especially for people living in Greece. Bitcoin can be used to easily facilitate trade across borders, and it would be very difficult (if not impossible) for governments to attempt to give bitcoin users a haircut or otherwise install capital controls.
For companies now trying to facilitate exports from Greece, whether they be large companies or individual freelancers selling their skills online, bitcoin could become the payment of choice. Instead of pumping cash into their frozen bank accounts, or having to resort to other extreme measures to get their money, Greek exports could simply have their clients send them bitcoin.
This would pump bitcoins into the country, and would help loosen up the increasing log jam that is occurring as normal trade breaks down. Bitcoin might not be able to outright replace the euro or a national currency, but with the coming financial crunch, it might be able to provide enough grease to keep the gears of the Greek economy turning.
Of course, bitcoin isn’t a panacea. Greeks who have their money frozen in their bank accounts, for example, won’t be able to use bitcoin to get their money out. The Greek government could also feel threatened by bitcoin and could try to restrict its use, though their efforts might prove fruitless.