Not With Bitcoin: Rumor ECB Expecting $500B Debt Quarantine in “Bad Bank”

Not With Bitcoin: Rumor ECB Eyeing $500B Debt Quarantine in “Bad Bank”

The European Central Bank, or ECB, may be fearing default as rumors circulate that it is going to transfer at least half a trillion euros of “bad” debt in a “bad bank.”

As Reuters reported on June 10 citing two sources familiar with the situation, the ECB now wants to quarantine its financial junk.

ECB praises “useful” asset management companies

The reason, the sources say, is that increasing unemployment may exacerbate the risk of mass defaulting on debt obligations.

Even excluding the coronavirus unemployment surge, the Eurozone already has $500 billion of debt which may not be repaid at all. This includes credit cards, loans and mortgages, Reuters states.

The ECB declined to confirm the plans, which it had previously reviewed several years ago but shelved.

A “bad bank” would allegedly protect other vulnerable lenders from the full brunt of coronavirus-driven economic turmoil. It could take the form of an asset management company, something which an ECB representative seemed to endorse when asked last week.

“I have been very supportive of asset management companies. I think they are useful,” chief bank supervisor Andrea Enria said in a press conference.

Speaking about bad banks, Enria noted:

“Many of these schemes have ended up in the black, making profits.”

Fed to comment historic money printing

The plans follow the ECB doubling its coronavirus stimulus measures to €1.35 trillion. In the United States, the Federal Reserve will meet to develop a roadmap for handling the economic consequences of the crisis.

The Fed has been unprecedented in its money printing since March, CryptoTheNews sharing a report that its balance sheet now reached $7.16 trillion — up $3 trillion in three months.

One analyst speaking to Financial Times said that the market was “hungry for guidance” from the Fed, amid fears of a second wave of coronavirus infections and that strange relaxed attitude to social distancing shown by authorities during the ongoing U.S. protests.

Growing debt presents one of the main arguments for “hard” money like Bitcoin (BTC). Central banks’ ability to print money without backing is an impossible idea for the most popular cryptocurrency, as for network participants to agree, they would need to accept a decline in the value of their own savings.

Fiat inflation represents a stark contrast to Bitcoin’s reducing supply, which one analyst compared to a flattening coronavirus infection curve this week.