Bitcoin was born during a banking crisis, and designed to escape the same crisis. Last week we already mentioned that banks in Lebanon are closed, and the population is suffering. Something similar is now taking place in China, where citizens cannot withdraw their savings.
Little trust in banks
Few people have anything positive to say about our modern banking system. Yes it works, but so many things are playing in the background that do not bode well to the image of the banks. Examples are fraud, money laundering, low interest rates and high transaction costs.
And in Henan in China, savers stand in line at a national bank for the third day to claim their money.
Waving with money
According to the Wall Street Journal, the Henan Yichuan Rural Commercial Bank, just outside the city of Luoyang, was flooded while bank directors tried to control the crowd with propaganda. Consider, for example, bank employees waving packages of cash in front of television cameras to show how much money the bank literally has.
Bank managers try to convince customers not to withdraw all their money from the bank, by offering products with a higher yield and offering gift vouchers for supermarkets.
Snowball effect
According to the financial newspaper, the state-supported Yichuan Bank has financial problems. It would be the fourth financial institution that the government had to save this year. Since last year, the bank has outstanding more than a billion yuan in bad loans.
Rumors circulated on social media that the bank was on edge of the abyss and this caused a snowball effect.
WSJ wrote that the Chinese authorities arrested two women, they were accused of spreading false rumors, rumors that later proved to be true.
Fourth Chinese bank this year
The newspaper also writes that many small regional banks have expanded too aggressively, which only exacerbates the problem.
Earlier this year the Baoshang Bank, then the Bank of Jinzhou, and two months ago the Chinese Heng Feng Bank failed. And now Yichuan Bank completes the quartet.
The WSJ article also states that the above banks manage at least 4% of the total assets of the Chinese banking system. It starts to look like a house of cards, where bitcoin can be the joker.
Leave the prison without paying
Bad news for banks is good news for bitcoin. Bitcoin is in fact a response to the banking crisis and intended to offer a way out. Rhythm Trader “puts this nicely:
Bitcoin is not a get quick quick scheme, it’s a get free quick scheme.
BREAKING: The 4th bank to fail this year in China is now flooded with citizens rushing to withdraw their savings as fast as they can.
They’re being offered extra interest and equally gift cards to stop withdraws.
Bitcoin isn’t a quick quick scheme, it’s a free quick scheme.
– Rhythm (@Rhythmtrader) October 31, 2019
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