Toward a parallel market in Cypriot euros

by on April 23, 2013 at 1:44 pm in Economics, Law | Permalink

Some people are trying to get this off the ground, although the legal issues appear to be murky:

Is your cash stuck in a Cypriot bank? Someone might be willing to take it off your hands.

Distressed-debt investors and brokers are circling Cyprus, the Mediterranean island that last month plunged its two main banks into an emergency restructuring and blocked thousands of depositors from touching all their money.

The idea: investors buy frozen bank deposits, at a discount. Depositors who need access to their money get a payoff immediately, instead of waiting months or years for the bank restructuring to be completed. Investors get a shot at a big payoff down the line.

The article is here, and hat tip goes to @RobinWigg.

Bob Knaus April 23, 2013 at 2:05 pm

Or the Cypriot government could offer the same deal. Then it becomes a voluntary tax, at market rates.

JWatts April 23, 2013 at 5:49 pm

Some people might consider that if the Cypriot government were offering the same deal, it wouldn’t actually be a ‘voluntary’ tax.

Anon. April 23, 2013 at 2:50 pm

How do I get in on this?

Go Kings, Go April 23, 2013 at 3:47 pm

Good day,

With warm heart I offer my friendship, and my greetings,and I hope this letter meets you in good time. It will be surprising for you to receive this proposal from me since you do not know me personally.

However, I am sincerely seeking your confidence in this transaction,which I, propose with my free mind and as a person of integrity.

A) It is practically impossible for me to carry out this business alone.

B) You live in a foreign land far away from mine.

This should normally not be a requirement, but when you understand the transaction then you will understand why it is important that you live far away from me.

C) The amount of money involved in this transaction is Fifteen Million one hundred thousand united states dollars (US$15,100,000.00) which is too much for a man of modest means like myself to handle in my country.

I believe from my few points above, you can begin to get an idea why I need your participation.I am writing you in respect of a foreign customer Simeon Arag who has a Domicillary account in my Cypriot bank.

My proposal, I am prepared to place you as the next of kin in a position to instruct my Cypriot bank to release the deposit to you as the closest surviving relation. Upon receipt of the deposit, I am prepared to share the money with you in half. That is: I will simply nominate you as the next of kin and have them release the deposit to you. We share the proceeds 50/50.I would have gone ahead to ask the funds be released to me, but that would have drawn a straight line in my involvement in claiming the deposit. I assure you that I could have the deposit released to you within a few days. I will simply inform the bank of the final closing of the file relating to Simeon Arag I will then officially communicate and instruct them to release the deposit to you.

I await your response.
Respectfully,
Shamash Din Choudhry.

Brian Donohue April 23, 2013 at 3:54 pm

well played!

Silas Barta April 23, 2013 at 3:04 pm

We shall call such entrepreneurs “defreezers”!

LK April 23, 2013 at 3:27 pm

Nice Atlas Shrugged reference. I was thinking more of Catch-22 though.

LeonK April 23, 2013 at 3:27 pm

Nice Atlas Shrugged reference. I was thinking Catch-22 though.

mark April 23, 2013 at 5:25 pm

Why does someone sell? I would think they could get a better deal by borrowing euros outside of Cyprus. Especially if they have a banking relationship with some non-Cypriot bank.

Joey April 23, 2013 at 7:12 pm

This was quite common with online poker sites when Black Friday happened. People bought the accounts of players at small to large discounts, depending on player reputation, account size, and the poker site involved.

meicate April 23, 2013 at 8:50 pm

The headline shows the author cannot not understand how the Euro is structured so that banking/sov. crisis will not become currency crisis.

Although an insufferable bully and bore, Taleb is right about the utter failure of academic economists.

Nicholas Weaver April 23, 2013 at 9:12 pm

Since IIRC, you can bring euros out of the country to buy goods for imports, and you can export goods, I’d expect there is already forming “Money conveyor-belts”: A block of goods is “bought” outside of Cyprus at a high price and “imported”, then “sold” as “exports” at a lower price when they leave the country again. The difference is now captured in real Euros rather than Cypriot Euros.

Then just lather, rinse, repeat.

John April 23, 2013 at 11:08 pm

Surely they could have found a less disruptive way to leave the euro.

X April 24, 2013 at 6:37 am

It’s weird how much crime governments can get away without bloody revolution.

Guillaume Nicoulaud April 24, 2013 at 11:56 am

Time value of money!

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