The Greeks Vote NO, Setting Stage for Possible Parallel Currency and Eurozone Exit

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The Greeks Vote NO, Setting Stage for Possible Parallel Currency and Eurozone Exit
oxi-rally

Greek voters have issued a surprisingly loud and clear statement of support to Greek Prime Minister Alexis Tsipras, and defiance to European authorities and the International Monetary Fund.

In the referendum celebrated Sunday, an overwhelming majority of more than 61 percent of Greeks, with an impressive 22 percent lead over the 39 percent of Greeks who voted yes, have said no to the bailout deal proposed by the country’s creditors.

Opinion polls before the referendum showed the difference between the Yes and No camps as too close to call, and therefore the strong majority won by Tsipras comes as a shock to many observers. The European authorities should consider the results of the referendum a wake-up call – the Greeks have renewed a mandate to Tsipras and his Syriza-led government to adopt a firm position in negotiations, and unambiguously shown that they are ready for Grexit – the forced exit of Greece from the Eurozone and perhaps even the European Union itself – if the negotiations fail.

Grexit could have catastrophic consequences for Greece. But the consequences for the European Union could be equally catastrophic, because Grexit would establish a dangerous precedent. In fact, as shown by the results of recent local, national and European elections in the U.K., Spain, Italy and other countries, European citizens are more and more dissatisfied with the Euro and the E.U. Therefore, Grexit could start a domino effect from which it could be very hard for the E.U. to recover, and E.U. authorities are expected to take that into account in forthcoming negotiations.

“You made a very brave choice,” said Tsipras in a TV address to Greeks. “The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.” The Greek P.M. said he wants to keep Greece in the E.U. and the Eurozone, and promised to reach an agreement with the country’s creditors in two days, which might be overly optimistic.

Former Greek finance minister Yanis Varoufakis, who said before the referendum that he would resign in the case of a Yes vote, resigned anyway in an unexpected move. Varoufakis’ resignation is to be interpreted as a conciliatory move toward Greece’s creditors. In fact, he had played an aggressive “bad cop” role in the negotiations, and even accused Athens’ creditors of “terrorism” the day before the referendum. It’s easy to read Varoufakis’ resignation as a performance staged to offer a face-saving exit (pun intended) to Europe, and open the door to further negotiations.

“I was made aware of a certain ‘preference’ by some Eurogroup participants, and assorted ‘partners,’ for my… ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement,” Varoufakis said in a statement reported by Reuters.

Reuters’ columnist Hugo Dixon notes that the Eurozone partners and the International Monetary Fund aren’t likely to offer Greece a deal significantly better than the proposal rejected by the Greek voters. Tsipras “might therefore be tempted to introduce a new currency, either to replace the euro or to run alongside it,” speculates Dixon. “Not only would this enable him to reopen the banks, it would also allow him to pay out salaries and pensions. The new currency would immediately fall to a big discount to the euro, perhaps half its value.”

In June Bloomberg Business reported that German Finance Minister Wolfgang Schaeuble said that Greece may need a parallel currency if talks with creditors fail, according to sources familiar with Schaeuble’s views. Former Greek Finance Minister Varoufakis proposed a parallel IOU-based currency, dubbed Future Tax Coin (FT-Coin), similar to a cryptocurrency in some aspects. Varoufakis is not impressed by bitcoin as a currency, but he is persuaded that its underlying technology could be put to effective use in troubled economies.

“Greece Will Adopt the Bitcoin If Eurogroup Doesn’t Give Us a Deal,” reads an April Fool’s joke posted by Varoufakis on Twitter. Could Greece adopt a parallel cryptocurrency? The idea seems taken from a science fiction novel… but the Greek crisis has had many surprising developments so far.

Photo Ggia / CC BY-SA 4.0

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Coinbase Positioned to Grow Bitcoin Presence in Australia after Investment by Westpac
sydney

Following the strategic investment of Westpac Banking Corporation’s venture capital firm Reinventure earlier this year, Coinbase co-founder Fred Ehrsam announced that the company has set its plans to a potential expansion to Australia, and is currently trying to educate the local regulators on the benefits of bitcoin.

Coinbase’s Series C funding round, participated in by Westpac, raised $75 million USD in January 2015, from large financial organizations and venture capital firms including Spanish bank BBVA and Fortune 500 financial services group USAA. This deal marked the first investment of an Australian bank to a Bitcoin company.

“We’re very excited to be working with such a great management team and look forward to helping them grow their business,” Simon Cant, co-founder of Reinventure, told The Sydney Morning Herald.

Although the funding round was completed in January 2015, the involvement of Westpac Banking Corp. in Coinbase’s Series C funding round was disclosed only on June 29.

As the blog post read, “One of Reinventure’s primary objectives is to create opportunities between its portfolio companies and Westpac, Reinventure’s largest investor and one of the top 15 largest banks in the world. We plan to work closely with Reinventure and share insights into the use of digital currencies globally.”

Ehrsam, former Goldman Sachs trader and Coinbase co-founder explained that the strategic investment of Westpac will allow Coinbase to educate financial regulators in Australia about bitcoin, which will hopefully ease the expansion of Coinbase throughout Australia. Ehrsam emphasized the benefits of bitcoin, and its cost efficiency and transparency that enables anyone to transfer money internationally, without the involvement of third-party institutions.

“We plan to work closely with Reinventure and share insights into the use of digital currencies globally,” the San Francisco-based Coinbase said in an announcement on its blog on Tuesday morning. A spokesman for Westpac confirmed the investment.

Coinbase’s “mission is to be the most trusted bitcoin company in the world and it is investing heavily in next generation security. Reinventure’s investment will provide key insights into the use of digital currencies and associated technologies,” a Westpac spokesman announced.

With the support of Reinventure and its connections with the local regulators of Australia, Coinbase will aggressively pursue its plans to expand to the Asia Pacific region, and to establish trust and relationships with regulators.

“In the U.S., we are known as the pre-eminent bitcoin company because we have trust of consumer in terms of security and relationships with regulators,” Ehrsam said. “As we open to new markets, we want to establish that trust as well.”

Coinbase will first work closely with Westpac and educate the bank about the benefits and possible applications of bitcoin that could be implemented to optimize banking operations.

Coinbase co-founder Ehrsam has gone through several discussions with Westpac CEO Brian Hartzer, and stated that Hartzer feels the need to understand the blockchain and distributed ledger technology used by bitcoin, and the bank is wanting to “get smarter” now.

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Spartan Route Offers Invoicing and Bitcoin Payment Service to Greek Businesses
greek-market

Earlier this week, Greece became the first developed nation ever to default on the International Monetary Fund (IMF). Negotiations with the European Union (EU) and the IMF are stalling, and Greek voters on Sunday rejected new bailout terms.

On Monday, Greece closed its banks and imposed capital controls to prevent financial chaos after the breakdown of bailout talks. Banks and ATMs are still working on a very limited basis, which makes things difficult for families and pensioners. For businesses and entrepreneurs who depend on cross-border sales and imported goods or services, the situation couldn’t be worse: They are unable to pay their suppliers abroad because cross-border bank wires are suspended, and the have only limited access to their sales income. Even the best-performing Greek businesses that are still making sales abroad can’t use their hard-earned cash.

With the banking system locked down, capital controls prevent Greek citizens from accessing cash and this disrupts the economy. The Irish company Spartan Route has come to the rescue of Greek businesses with an innovative service proposal: They will invoice their Greek clients’ foreign customers in euro, collect the payment, and send bitcoin back to Greece.

Their proposal to Greek businesses is simple and crystal clear: 1. Invoice Spartan Route for your exports, 2. Deliver your goods as normal to your customer through your current supply chains; 3. Spartan Route pays you with bitcoin; 4. Spartan Route invoices your customer for euro.

Spartan Route believes that the Greek people are being politically and financially blackmailed by creditors due to the economic stranglehold on the country’s financial system. The company’s blog states Spartan Route’s position loud and clear:

“The Greek people now witness the noose of economic and political oppression dangling at the hands of a Mr. Jean Claude Junker and his bandit of EU mercenaries. The sovereignty of the nation has continuously been diluted by the stark sanctions imposed by the EU and the ECB. The current creditors’ demands on the Greek nationals, if accepted, will propel Greece further into an amputated brand of sovereignty.

“Bitcoin can help the people of Greece,” continues Spartan Route. “The Greek people are wrestling their sovereignty back from the EU, and Greek nationals can chart their own economic course through the adoption of Bitcoin. Bitcoin can also help the Greek export industry to stay intact, economic sanctions make it near impossible from many Greek business to operate and survive. The adoption of Bitcoin can help transcend these trade barriers, opening up Greek exports to the world once more.”

Photo (CC) Brian Solis / Flickr

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The Blockchain Could Make Existing Securities Industry Players Redundant, Says BNP Paribas Analyst
bnpparibas

Writing on Quintessence, the financial magazine of BNP Paribas, financial securities research analyst Johann Palychata analyzes the possible impact and future implications of the blockchain for securities markets. He believes that Bitcoin is really an innovation and a disruptive open-source technology for the financial world.

“Its core is the first successful attempt for a secure and decentralized register,” says Palychata. “It should be considered as an invention like the steam or combustion engine. ”

BNP Paribas, a French bank headquartered in Paris that was formed through the merger of Banque Nationale de Paris (BNP) and Paribas in 2000, is one of the largest banks in the world. Based on 2012 information BNP Paribas was ranked as the third-largest bank in the world, as measured by total assets, by Bloomberg and Forbes.

Though Palychata’s opinions shouldn’t be interpreted as an official position statement from the bank, publication in the official BNP Paribas magazine lends them a certain official aura.

Palychata considers two possible scenarios for blockchain-based securities markets.

“The first scenario creates a total disruption. In its purest form, a distributed blockchain system allows all market participants direct access to the DSD (Decentralised Securities Depositary), to the exchange and to the post-trade infrastructure (clearing and settlement),” he writes. “If this setup develops then existing industry players might be redundant.”

It’s surprising that a representative of a major bank even considers the possibility of this scenario, which would be a nightmare for the financial establishment. However, Palychata continues, “given the challenge of keeping the private key of the account safe, it is possible that investors will entrust an authority to safe-keep the private keys. It is also possible that custodians will be responsible for the application layer over the blockchain or that they will launch their own network.

“The second scenario is an integration within the post-trade ecosystem,” he says. “The distributed ledger might only be the next generation of IT infrastructure. In this scenario custodians or settlement infrastructures might use the blockchain to record the ownership and trades between themselves; however, end investors will still need to use a custodian to have access to the market.”

It appears that this second scenario is becoming closer with the recent initiatives of companies such as Nasdaq and Overstock. Nasdaq partnered with San Francisco-based bitcoin API startup Chain to implement blockchain technology in its Nasdaq Private Market. And Overstock became the first company to offer qualified buyers the option of purchasing corporate bonds that will trade using Bitcoin’s blockchain protocol.

“The ledger will only be accessible to authorized market participants,” Palychata continues, exploring the second scenario. “Existing actors will remain in charge in this scenario. However, their level of service could change and they may deploy new services that they could not in the past because the investments required were a huge barrier to entry.”

Previously in November, Palychata published an article arguing that bitcoin and other digital currencies could shake up traditional banking and financial services. PYMNTS noted that Palychata’s article, which publicly suggested that “the development of an alternative to the current banking system is under way,” was remarkable because it came from one of the world’s largest banks.

Photo jyhem / Flickr 

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