The COVID-19 pandemic has proved to have far-reaching effects on the lives of people across the globe. Not only are hundreds of thousands of people at risk of premature death due to the virus but the powers that be are adding to people’s misery.
In this article, we discuss the actions of governments and financial institutions that have negatively impacted individuals across the globe, while making a case for Bitcoin (BTC) at the same time.
Beirut imposes cash restrictions
The Coronavirus has only served to make matters worse in Lebanon, where the economy has been on a downward trajectory since last October. Tensions have been rising in the Middle Eastern country with protestors taking to the streets to express their displeasure over the falling value of the Lebanese Pound.
Following the spread of the global spread of the Coronavirus, Tripoli imposed lockdowns, leading to fewer protests. However, mass demonstrations have since picked up in Beirut, Tripoli, and other major cities following even greater economic turmoil in the country.
While the protestors are angry about the widespread corruption in the government leading to massive losses in public funds, and the mismanagement of the economy, which has led to the devaluing of the national currency, the current wave of dissent is informed by the Central Bank’s latest decision to restrict cash withdrawals.
The Lebanese Central Bank has imposed these measures to prevent a run on Lebanese banks and a weakening of the Lebanese pound. Moreover, withdrawal in foreign currencies has been completely stopped. Currently, people can only access a limited amount of their own money through the bank as local currency withdrawals are also limited.
Demonstrations have turned violent, injuring and killing people. Bank buildings have also been on the receiving end of violence. As reported, several banks in northern and southern Lebanon were attacked, some with firebombs, reflecting rising public anger against banks.
Meanwhile, yesterday, on May 16, Lebanon’s financial prosecutor has ordered the arrest of the head of monetary operations at the central bank amid a widening probe into manipulation of the country’s volatile currency.
Russian ministry proposes intrusive financial disclosure move
The Russian government is attempting to enact a controversial proposal that will see the state gain access to citizens’ financial data in a quick and easy way.
In a letter to Elvira Nabiullina, the Chairman of the Central Bank, Vladimir Kolokoltsev, the Minister of Internal Affairs, outlined the motivation behind the proposal, explaining that the state was losing valuable tax money due to the movement of currency from local bank accounts.
The letter states: “Now law enforcement agencies receive the necessary information too slowly, which is why money is being withdrawn from banks. As a result, investors, and ultimately the state, are losing billions of rubles.” To combat this, Kolokoltsev proposes that law enforcement agencies receive broader powers that will aid in the quest to obtain information and documents related to financial transactions.
If ratified, this proposal is likely to cast a gloomy shadow on the financial sovereignty of Russian citizens since the state will have unobstructed access to their financial records, which can have a number of effects on the funds held in the accounts. The Central Bank is against the move, believing that it will lead to decreased trust in the banking system.
As reported, Russian financial analysts believe increased state regulation and surveillance are likely to lead people away from fiat currency into the cryptocurrency sector. This is because people want to have control over who has access to their private financial data, and cryptocurrency provides them with greater control in this regard.
Viktor Pershikov, an analyst at Russian firm 8848 Invest states:
“If regulators and financial authorities go along the path of prohibitions, then this will definitely lead not only to an increase in demand for anonymous cryptocurrencies that can hide wallets and transaction amounts, but to the creation of a significant shadow cryptoeconomics … This path will definitely not lead to anything good.”
Deutsche Bank introduces negative interest rates
Deutsche Bank, Germany’s biggest financial institution, is planning on instituting negative interest rates for new private customers from tomorrow, May 18, 2020.
In a statement given to Handelsblatt, a spokesman for the bank stated: “The continuing pressure from negative interest rates makes it necessary for Deutsche Bank to charge custody fees for new contracts for high deposits beyond an allowance of EUR 100,000 per account from May 18, 2020.”
While negative interest rates have been in effect in Germany and other parts of Europe, they have largely been confined to corporate customers. Now, however, the net is being widened to include high-value retail customers. Instead of receiving interest on the funds stored in the bank, these customers will now have to pay a levy to the bank to access their funds.
Deutsche Bank insists the new regulation will only affect new customers who are opening current and overnight accounts. The rates will also be in effect in Postbank.
Quantitative easing in the US
The Federal Reserve has resorted to printing money in an effort to bolster the US economy in light of the COVID-19 lockdown’s effects on business in the country. This is the latest in a number of quantitative easing measures undertaken by the Federal Reserve.
While proponents of these measures believe that these efforts are imperative to ensure the smooth functioning of the economy during the unprecedented COVID-19 global pandemic, opponents believe that it is likely to have negative outcomes for the financial state of the individual.
Quantitative easing can result in higher inflation (however, hyperinflation is not estimated) and increased economic inequality. For the individual, inflation spells trouble as the value of the currency they hold will likely to decrease in value as the prices of goods increase. Given the uncertainty of the pandemic, many are, rightly so, worried about the long-term effects of the measures undertaken by the Federal Reserve.
Making a case for Bitcoin
The above-listed government policy actions are reducing people’s access to their own money, diminishing financial sovereignty, and may reduce the value of the fiat currency they hold due to inflation. For anyone who understands Bitcoin, these actions make a strong case for holding part of one’s funds in bitcoin.
Bitcoin was designed to avoid such eventualities as it provides individuals with personal financial sovereignty and complete control over their funds. Provided you hold your BTC in a personal wallet of which you hold the private keys, you and only you have access to these funds.
No bank, government or other centralized authority can easily take your coins away from you. For individuals in Lebanon, for example, this is a huge selling point right now.