Unless you ignore news reports, you’d know that Greece is in a spot of bother at the moment, and may default on its sovereign debt.

Quite a few sites have suggested that Bitcoin could, or should be the next currency of Greece should it be thrown out of the Euro area.

Here’s what you need to know about the so-called “Plan B” Bitcoin solution for Greece.

What’s happening now

The shortest way to describe what’s going on with Greece at the moment is to simply say that the Greek Government ran up the proverbial Government credit card in the form of excessive state debt, and are now unable to repay it.

Like many socialist-oriented Governments in South Europe, Greece loves paying people to not work and throws money around like there’s no tomorrow, but the problem is tomorrow just arrived.

The immediate crisis is related to a €1.6 billion ($1.81 billion) loan due to be repaid by the end of June to the International Monetary Fund (IMF.) This isn’t the first time Greece has been in this position, but European Union partners such as Germany are becoming tired of bailing Greece out in these situations without them fundamentally reforming their economy, including specifically cutting payments made under their massive, unsustainable (they keep borrowing money to pay for it) welfare system.

At the time of writing there’s a crisis meeting due Monday afternoon GMT between European leaders to address the situation after Greece once again this week failed to compromise; in context, the current Greek Government was elected on an anti-austerity platform (no cuts) because the Greek people have this magical idea that they should be given free reign to spend money that doesn’t belong to them, and never repay it.

How is Bitcoin involved?

In the event that Greece defaults on its debts, it will be looking for a new currency in short shrift. This could come about in two ways: they are literally chucked out of the Eurozone by other Eurozone members, meaning they will no longer be able to print Euros (each European country has the ability within the overall framework to print or mint an allocated amount of currency,) or the other option is that Greece will simply by itself withdraw from the Eurozone.

Bitcoin has been suggested as a replacement currency for the country, and the idea isn’t helped by an April Fools Day joke by the publication Greekreporter claiming that the Government of Greece have said that they would do just that.

There is also some anecdotal evidence of Bitcoin growing in popularity in Greece as the crisis deepens.

In the event of a default, it is highly likely that Greek Government will suspend withdrawals from banks, or at the very least highly restrict them to stop capital outflows from the country.

Already this week, in advance of a default and restrictions of withdrawals, some €2 billion was withdrawn from Greek banks between Monday and Wednesday alone out of a total household and corporate deposits of €133.6-billion euros held by Greek banks as of end-April.

Bitcoin does provide a way for Greeks to invest that withdrawn money in an alternative financial system that is beyond the control of their Government, and, therefore, can’t be seized or controlled, and given Bitcoin is up 11 percent in June the suggestion is that at least some Greeks are doing just that.

Could Bitcoin become the currency of Greece?

If you believe the hardcore of Bitcoin supporters, not just in the media and on forums such as Reddit’s r/Bitcoin, the answer is yes.

But despite the dream, at the time of writing it’s highly unlikely, primarily as the Greek Government is on the record as saying they won’t.

Via Metro:

In fact, the finance minister of Greece, Yanis Varoufakis, agrees that because it is deflationary, Bitcoin would be bad for Greece.

He then goes on to say that Bitcoin is a flawed currency because it is deflationary. This misses the point. Bitcoin is a global currency (or more correctly a ‘value-transfer’ system) for anyone and everyone and not a currency designed for use by a government.

The shortest version is that without Central Government control, the Greek Government couldn’t control monetary policy (that is both supply and interest rates on supply) if Bitcoin was the official currency in the same way that it can’t control the Euro (but could with its own currency,) and hence Bitcoin could cause rapid deflation within the Greek economy.

Bitcoin as a secondary currency in Greece

There is, however, a strong chance that Bitcoin could take the mantle of an unofficial secondary currency in Greece.

In the event of a Eurozone exit Greece will likely revert to the Drachma (its pre-Euro currency) and given its track record with finances it could in all likelihood follow in the steps of Germany’s Weimar Republic in the 1920’s, or more recently Zimbabwe, and print money to pay its citizens who are suckling off the public welfare teat.

Potentially, and this is sadly no exaggeration, one of the main cradles of modern civilization could become apocalyptic, financially, in the space of a few years.

Countries with collapsed economies traditionally go one of two ways when it comes to the exchange of goods: bartering, or the use of a secondary currency.

Given that Bitcoin is decentralized and not beholden to any Central Bank or the policies of another country, it does sit well positioned to take some, if not a substantive role in a floundering Greek economy.

We don’t normally give investment advice at SiliconANGLE but if you were betting on Bitcoin rising further off the back of the clusterf**k that is Greece, it would seem to be a fairly appealing investment.

Image credit: Creative-om/Reddit