To prevent the adverse economic effects of the coronavirus, governments and institutions around the world have been pulling out all the stops, so to say. In Egypt, this has taken the form of a restriction placed on banking activity.
Many say this validates the need for Bitcoin and other decentralized forms of cryptocurrency because as they say, “not your keys, not your crypto.”
Egypt Limits Cash Withdrawals In Move Proving Bitcoin
According to a Reuters report released Sunday, Egyptian banks have been told by the central bank to start restricting daily withdrawals and deposits “in a move seemingly designed to control inflation and hoarding during the coronavirus’ spread.”
The restriction allows individuals to withdraw 10,000 Egyptian pounds ($635) at most and companies to withdraw five times that, though the latter restriction can be bent if employees need to receive payment in cash. There were also limits placed on ATM withdrawals.
Like the rest of the world, Egypt’s banks abide by a fractional reserve policy, whereas institutions aren’t required to keep 100% of a customers’ deposits, but can instead loan out some of the deposited value, thereby increasing the supply of money (or at least credit) in the economy.
This move is likely to prevent a cash shortage. Indeed, in a statement made on television just prior to the news of the central bank restriction, the monetary authority’s governor, Tarek Amer, said:
We found that individuals are withdrawing money from the banks although they did not need it … they withdrew 30 billion pounds in the past three weeks. We want some discipline. We live in a society and we have to think of others.
Although there is no evidence suggesting that Egyptians are turning to Bitcoin amid this crisis, many in the space rallied around this news as a case validating the need for cryptocurrencies.
Bitcoin commentator Vis wrote:
Egypt’s banks just limited withdrawals and deposits. […] This is why bitcoin was created. […] If someone can restrict it, it’s not your money.
BREAKING: Egypt's banks just limited withdrawals and deposits.
The central bank put the daily limit for individuals at 10,000 Egyptian pounds ($635) from their local bank and 5,000 pounds ($317) from any ATM.
This is why bitcoin was created.
— Vis (@Vis_in_numeris) March 30, 2020
Notably, after restricting the access Egyptians have to their money, the central bank promoted the use of electronic forms of payment, though this was presumably in reference to credit cards, not any digital asset.
Not the Only Banking Crisis Unfolding
Nearby Lebanon has been under much economic and financial stress, too, over the past few weeks.
In fact, the country has been in the midst of a crisis over the past few months, which has forced banks to impose capital controls in an attempt to save the economy. The situation is so bad that bankers, according to Reuters, there is set to be a restructuring of sovereign Lebanese debt that will “leave many financial players illiquid.”
Furthermore, a report from London-based business outlet Euromoney, citing a “senior Lebanese banker,” says that a “bail-in” or “haircut” may be the only way to save the banking sector.
A “haircut” in banking is when governments trim the accounts of depositors without their permission. This policy was last seen at scale in 2013 in the economy of Cyprus, when the government of the European island-nation caused a massive increase in demand for Bitcoin when it placed limits on withdrawals and announced an impending haircut to wealthy depositors.
It isn’t clear if Lebanon will implement such a drastic measure, but the around banking has already forced some to Bitcoin, with Al Jazeera reporting in February that a number of local traders have seen demand for the asset spike.