Digital Currencies a Silver Lining in the Dark Cloud of Greece’s Economic Crisis

Bitcoin Magazine
Digital Currencies a Silver Lining in the Dark Cloud of Greece’s Economic Crisis

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 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, 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.

The post Digital Currencies a Silver Lining in the Dark Cloud of Greece’s Economic Crisis appeared first on Bitcoin Magazine.

BitGo Announces Launch of Solvency Proofs Verified by BitGo

BitGo announced today the release of its latest product offering, Verified by BitGo, a product that provides a real-time view of bitcoin assets owned by a company.

Whereas in the past, verification attempts were slow and often had security risk concerns, BitGo hopes that this will be a verification that allows it to publicly share all of its assets. Further, it will be able to cryptographically display that it is in a solvent state.

When dealing with brokerages and wallets, knowing that the provider is solvent can go a long way toward making a decision on using a service. This service will enable end users to analyze what the company’s assets are and compare that to its liabilities, even drilling down to ensure that the user’s own account is included in the total liabilities.

“We’re offering Verified by BitGo to selected partners as part of our unified platform offerings. The first step needed is to use a BitGo wallet for storing the business’ bitcoin,” Ben Davenport, CTO and co-founder of BitGo, said in an interview with Bitcoin Magazine. “It is not yet available for general self-service signup, but we’re interested in working with other Bitcoin businesses to help their security & transparency.”

ChangeTip the First to Use

 In the announcement, it was revealed that ChangeTip was the first business that would be using the Verified by BitGo service.

“Building trust is critical to expanding our user base within the Bitcoin community and beyond, and using BitGo to demonstrate our Proof of Reserves goes a long way to achieving it,” said ChangeTip CEO Nick Sullivan.

According to an email exchange with Bitcoin Magazine, Sullivan believes that, “having the Verified by BitGo logo gives users an extra sense of security.”

However, BitGo is opening up its operation to anyone who uses the BitGo platform offerings. As Davenport said in a statement, “Today we are launching our Verified by BitGo service, bringing the era of unverified funds to a close.”

It Could Have Prevented MtGox 

MtGox is the perfect example of a business that was operating in an insolvent state for a significant period of time. Users had no idea that the amount of bitcoin they believed existed on the exchange was far more than actually existed.

The team at BitGo believes that if Verified by BitGo had been around when MtGox was operating that its service would have been able to alert users far sooner to the problems at the exchange.

“Yes, we believe it could have,” Davenport said. “Based on the information that’s been made public, we believe MtGox was effectively operating in an insolvent state for a very long period. While a regular audit like this would not have eliminated the possibility of a business going insolvent, it should help detect it far sooner, dramatically reducing the magnitude of the ultimate losses.”

In an internal crisis management document that was leaked, it was revealed that the company had lost 744,408 bitcoin in a theft that had taken place years earlier. Had a service like Verified by BitGo been around, it is feasible that many users would not have continued putting their bitcoin onto the exchange.

“We are already working with several other companies interested in the product, but don’t have specific names to disclose yet,” Davenport told Bitcoin Magazine.

The post BitGo Announces Launch of Solvency Proofs Verified by BitGo appeared first on Bitcoin Magazine.