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Breaking News: BREAKING: Terra Founder Do Kwon's Extradition To The US Approved

EU Proposes Account Freezes to Prevent Bank Runs; Bitcoin to the Rescue?

Ashour Iesho by Ashour Iesho
6 years ago
in News, Bitcoin, News teaser
0

Europian Union countries are exploring the idea of imposing an EU-wide account freeze measure to prevent potential bank runs. Could Bitcoin provide a viable alternative to secure depositors’ funds?


Preventing the Chaos

Preventing the Chaos

European Union states have proposed a new measure which would effectively allow them to freeze bank accounts before a bank run takes place. The measure was planned earlier this year in order to prevent bank runs similar to that of Banco Popular last month. The proposal wants to prevent depositors from pushing over the edge banks that are already failing or will likely fail.

According to EU rules, each depositor that has less than 100,000 euros deposited in a bank account is insured from a bank run. But under the new plan, a potential bank run could force the supervisors to freeze bank accounts of all depositors, and thus freeze withdraws from bank accounts.

Charlie Bannister, of the Association for Financial Markets in Europe (AFME), noted following:

We strongly believe that this would incentivize depositors to run from a bank at an early stage,

Countries that already have a moratorium on bank payouts, like Germany, have strongly supported this new plan. According to a person familiar with German government’s thinking:

The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,

The Bitcoin Effect

The Bitcoin Effect

Back in 2013, Cyprus’ banking crisis was a hair’s breadth away from a total economic collapse. Cypriot banks were desperate for a bailout from the EU and IMF and many account holders feared that their deposits would vanish. This fear caused a classic bank run and people were rushing to banks and ATMs in order to withdraw as much money as they could.

Inevitably, cash became scarce and the ATMs stopped working. Many saw Bitcoin as the last option to secure their funds. The crazy demand from Cyprus for Bitcoin caused the digital currency’s value to rise from $47 to $88 – an increase of over 88 percent! With the EU’s new proposal, many believe that Bitcoin can once again be a safe way for depositors to secure their funds from a bank run.

What are your thoughts on this new proposal? Do you think that it will prevent bank runs? Will Bitcoin be able to save depositors again from a bank run? Let us know in the comments below!


Image courtesy of Pexels

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Ashour Iesho

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