Could Bitcoin Become Greece’s Official Currency?
Greece faces a €1.5 billion payment to the IMF expires on June 30, and to make matters worse The Eurozone portion of Greece’s €245-billion bailout expires on the same day. This huge debt and interest is totally unsustainable for Greece to maintain and Greece has no more to give. This could mean Greece exclusion from the Eurozone.
Would it be a good idea for Greece to renounce the euro and adopt bitcoin? This would mean giving up their sovereign monetary policy. However, the finance minister of Greece, Yanis Varoufakis, believes that because Bitcoin is deflationary, it would be bad for Greece.
Monetary policy, used responsibly, is useful to manage public finances, provided it is not abused to issue too much currency. Greece cannot itself use monetary policy whilst it is part of the eurozone and adopting bitcoin would position Greece in the exact same position.
Varoufakis goes on saying that bitcoin is a flawed currency because it is deflationary. And that’s where he misses the point. Bitcoin is deflationary with a fixed amount of regular issuance controlled by the bitcoin software algorithm. The amount in issue today is around 14m and the total amount that can ever be issued is capped at 21m and this is not going to change ever.
It would probably be better for the country to consider adopting the bitcoin open source protocol to create its own government-backed national cryptocurrency with the Greek central bank and its national banks acting as validators with a pre-mined amount of the national currency equivalent to the amount of euros held in Greek banks. In addition, a small percentage should be pre-mined and distributed equally to each Greek valid social security number taxpayer.
If the Greek government issued a parallel digital currency it could boost the Greek money supply in opposition to the European Central Bank policy and return monetary policy to Greece. Besides, it would mark the beginning of a new Era for Governmental Monetary Policy.
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