Can Banks Steal your Money? The rise of bank bail-ins.

The financial crisis in 2008 was a game-changer in the financial industry. The housing bubble’s collapse led to bankruptcy, which affected even Wallstreet.

The U.S. treasury came in to rescue wall street by giving over 200 billion dollars in loans to hundreds of financial institutions. Even though it was a good amount, it was insufficient as it accounted for only about 30% of the total cost of bailing out the entire Financial system, which is estimated to be 700 billion dollars. Wall Street speculation was to blame though only one person went to jail, Kareem Sarah. The SEC allegedly destroyed the evidence given as part of the investigation. The bank bailouts are why Satoshi Nakamoto created bitcoin.

Financial crisis solution – Bail-ins

Politicians had a plan for new regulations. An example is the Dodd-Frank Act.

According to the Dodd-Frank Act, derivatives claims come first in the event of a financial collapse. That means that in the event of a financial crisis, derivatives debt owed by big banks will be paid off before anything else. The difference is that these debts won’t be paid off by bailouts but by bail-ins.

A bailout is when a big bank receives money from someone else to pay back its debts, while a bail-in is when a big bank uses its clients’ money to pay back its debts. It means the bank will use your deposits in accounts or money you lent it to pay debts.

Dodd-Frank Act opened the door to allowing big Banks to use their client funds to bail in themselves in a financial crisis.

The people in power had been working on alternatives to bailouts since 2008. The urgency to develop an alternative to bailouts increased after the financial crisis started to affect Europe.

In mid-2012, the IMF published a paper advocating bail-ins as the ideal alternative to bailouts. It, however, needed a ground to test out the bail-ins.

Cyprus – the testing ground

Cyprus was one of the European countries hit the hardest by the financial crisis. By the end of 2012, Cyprus was desperate for a bailout. In early 2013, the IMF and the European Union bailed Cyprus for 10 billion euros. The IMF gave Cyprus multiple conditions; one was for Cyprus’s largest bank to execute the first-ever bail-in. Almost 50 percent of all bank account balances worth more than one hundred thousand Euros were seized.

The United States was the first to legalize bail-ins in 2010. The Dodd-Frank Act pushed the U.K. to follow suit in 2013. With the financial services act, the E.U. legalized bail-ins in 2016.

Bank Bail-in laws tend to vary from country to country. Although the laws may differ, they follow the same three rules, likely because of their Collective Conformity with the FSB. The three rules are:

  1. Bank bail-ins are only allowed for banks that are deemed to be domestically or globally important.

This rule pertains to those with the most assets under management. The FSB publishes a list of globally important banks every year. There are currently 30 globally systemically important banks, with JP Morgan being noted as the highest risk.

  • Bank bail-ins do not apply to bank balances below the deposit Insurance threshold.

In the U.S., the FDIC covers 250 000 deposits. In the U.K., the FSCS covers 85 000 pounds, and in the E.U., it’s 100 000 Euros with various insurers involved. Insurance funds in the U.S. and Europe are woefully underfunded, particularly when we factor in derivative claims.

Insurers don’t have enough money to cover all Bank deposits. In the case of the FDIC, its 2021 annual report suggests that it only has around 120 billion dollars in its Insurance Fund, which is low compared to the 19 trillion dollars of Bank deposits in the U.S.

  • The third rule of bank bail-ins states that you will be given some alternative asset in exchange for your lost deposits. Alternative assets are typically shares in the bank that you bailed out.

Even though bail-ins may be a good solution for banks and financial institutions, they may be inconvenient to end users. For instance, you could temporarily lose access to your funds during a bank bail-in. Banks could put limits on their hours of operations, payments, transfers, and limits on cash withdrawals until the bail-in process is complete.

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A Closer Look at the Crypto Regulation Proposed in the UK

The UK is considering introducing crypto regulation with the aim of protecting its consumers and promoting the growth of its economy. As the country strives to become a leading hub in the crypto industry, regulation is deemed necessary. Incidents such as the collapse of FTX have highlighted the urgency of regulation in this area. A clear and transparent regulatory framework will reduce the risks associated with crypto investments for consumers. The proposed regulation is still in the consultation stage and is expected to be finalized by the end of April.


Objectives of UK crypto regulation

The main policy objectives of doing the regulation include:

  • To encourage crypto regulation
  • Educate consumers about the risks associated with crypto investments
  • Preserve financial stability of the UK
  • Preserve market integrity of the UK

The proposed crypto regulations will be rolled out in two phases when they become law. Stablecoins will be addressed in the second phase, which will happen later in the year or early next year. At the moment, NFTs are not part of crypto regulation.

The UK has categorized crypto into different categories: Exchange cryptos, algorithmic tokens, governance tokens and fan tokens. Bitcoin and Ethereum fall under exchange tokens.

Initial governance method used

Crypto activities are currently not regulated by the Financial Conduct Authority (FCA). Decentralized finance makes it even harder to regulate, given its decentralized nature. Despite this, the UK introduced KYC and AML requirements for crypto exchanges in January 2020, requiring all exchanges to register with the FCA and subjecting violators to two years imprisonment. Many companies found the process lengthy and cumbersome, leading to some companies leaving the UK.

 Brief summary of the proposed  regulation

Crypto assets activities

They were the main target of the regulation. There is, however, one rule for all cryptos. This may be ridiculous as the crypto options are many. It would also be better if the regulation would be tailored according to risk. It is hard to tell the crypto activities occurring within Britain’s borders.

Crypto regulation will apply to crypto assets occurring within the UK. There is still the risk of UK citizens acquiring crypto from less regulated areas outside the UK.

As mentioned earlier, regulation of crypto assets will take place in two phases. The activities under phase two will include ICOs, crypto borrowing and lending, crypto custody services.

Decentralized coins such as Dai will not be subject to regulation. They will be treated as unbanked assets like BTC and ETH since they are unbanked. Dai may be affected since it is backed by USDC since it is a stablecoin requiring regulation. The UK is not planning to ban algorithmic stablecoins. Decentralized, algorithmic and NFTs are favored as the regulation only applies to cryptos not crypto coins and tokens. Regulations will come later.

Regulations related to new crypto

New crypto includes coins and tokens listed on exchanges and not necessarily creation of coins and tokens. According to the new requirements:

  • Investors are given accurate info
  • Investors are compensated if misled
  • Forging crypto offerings should be banned
  • Exchanges to do a due diligence on all cryptos they list and give detailed info to users
  • Exchanges act as issuers of crypto with no issuers such as BTC.

Cryptos already listed have not been addressed. It is unclear if they will be subject to the same disclosure rules.

 Regulations on Exchanges

Exchanges will be required to:

  • Be More liquid and be resilient
  • Be More transparent
  • Have Accurate on and off chain data

Exchanges will also need to do detailed data reporting, and establish a bankruptcy process.

Regulation on other crypto intermediaries such as market makers

They will need to address conflict of interest, sufficient liquidity, and detecting market manipulation. Generally, market makers have the same requirements as exchanges.

General market abuse requirements

In crypto there are many market abuse incidents that are not covered under financial regulation. The new regulation will control market abuse such as pump and dump schemes and market manipulation. Defaulters will face punitive action. The public will also be taught how to identify market manipulation.

Regulation of crypto borrowing and lending

Some exchanges such as FTX were using customer funds and illiquid tokens as collateral for loans because crypto lending and borrowing is not regulated. The new regulation will ensure risk disclosure, balance sheet disclosure, and clear user contracts.


The United Kingdom is currently undergoing the consultation phase for the proposed crypto regulation aimed at protecting consumers, boosting the economy, and maintaining the financial stability and market integrity of the country. The regulation will aim to educate consumers about the risks associated with crypto, provide accurate information to investors, and control market abuse. The new regulation will bring clarity to the crypto industry and enhance the UK’s position as a crypto hub. Overall, the proposed crypto regulation is a significant step forward for the UK in establishing a fair, transparent, and secure environment for the growth and development of the crypto industry.

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WEF 2023 Summary: The Urgent Need to Control the Internet, Censor Information, and Centralize Finance.

The World Economic Forum (WEF) 2023 is an annual meeting with political leaders, business executives, cultural trendsetters, and international organization chiefs to discuss and tackle pressing global issues. This is the first conference that has happened in person since January 2020. The rest have been happening virtually due to the covid-19 pandemic.

The main agenda of WEF 2023 is the cost of living, a tight labor market, natural disasters, extreme weather events, how to prevent a global recession in 2023, and the resurgence of COVID-19 infections. The general theme is to discuss the future of the planet.

According to the WEF founder Klaus Schwab, the conference’s main goal is “cooperation in a fragmented world.” He believes that world leaders, who are WEF stakeholders, can seize the opportunity and turn the crisis into an opportunity.

Although the organizers had set key themes, the conference ended up covering different aspects of key themes. This includes metaverse control, online censorship, and financial centralization.

Metaverse control

There is no doubt that the metaverse is considered a global virtual village. In the conference, the discussion was between Microsoft and Accenture, both WEF members who have devoted interest in the metaverse. According to Klaus, the metaverse is a dream come true for WEF as it allows WEF to focus on bottom-up instead of top-down influence. The panel got a lot of engagement from young global leaders and Global Shapers. According to Klaus, there’s already a Consortium of more than 80 so-called Village Partners.

Accenture believes the value of the metaverse will grow to more than one trillion dollars by 2025. This is primarily because of the adoption by Enterprise and Industrial focused firms that will use the metaverse to train employees. Accenture also hopes that the metaverse will become a key component in children’s education. Klaus said that the WEF would ensure that the metaverse is governed to maximize the safety of its inhabitants.

It works with over 100 companies to ensure WEF is accessible to all. The metaverse initiative, “governance of the metaverse and the metaverse economy,” was officially launched in May 2022.

Online censorship

The main theme for this was the danger of disinformation. The panel moderators were parties from CNN and New York Times. According to Arthur, the New York Times chairman, disinformation is the core of every problem WEF tries to solve. Distrust in institutions is the most dangerous threat. Arthur also stressed that the only way to fix the issues of disinformation and distrust is for governments to partner with mainstream media.

Vera Jova, the vice president of the European Commission, advocated for “pre-bunking.” This is where you prevent or discourage people from posting anything against the official narrative. Vera added that the EU’s Digital Services act would make it impossible for fake news outlets to receive funding. The only short-term solution is to promote information from trusted sources and suppress everything else. This is what the EU’s Digital Services act does in the event of a crisis.

Financial centralization

Bloomberg moderated the crypto discussion, and the conversation was so anti-crypto. There were discussions that financial centralization is required to protect against unwanted volatility. ESG investing has been hard because most environmentally conscious companies are Grassroots startups that need more funding.

There were discussions about why crypto criminals presumably escape to the UAE.

Centralizing crypto will help WEF to have control over the industry, but the crypto industry will actively resist regulation. There was a revelation that the EU’s upcoming Mica regulations will not stifle Innovation but prevent crypto from becoming a wild west class.

As much as WEF covered many things, it is clear that the crypto industry will be affected. There is clarity that we are moving towards online censorship and centralization. In conclusion, the World Economic Forum 2023 in Davos was a wake-up call for leaders and stakeholders to take action on pressing global issues. The discussions on metaverse control, online censorship, and financial centralization should be of utmost concern as they have the potential to shape our future in ways we cannot yet imagine. The outcome of the conference serves as a warning to all that we must act quickly and act now.

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Online censorship is Coming : 4 countries to watch

Too much information on the internet can be good and, at the same time, bad. This is why governments are considering censoring some information from their citizens. The main culprits are Canada, the UK, Europe, and the US. The relevant federal governments are in charge of enacting the censorship law. Some governments have already proposed internet censorship bills, and it is only a matter of time before they are passed into law. Here are four countries to watch as this debate takes center stage:

Canada’s C-11

Canada is one of the countries to enact an internet censorship bill. The bill, dubbed c-11, is a  modification of the c-10 proposed in November 2010 but failed. The main reason for failure back then is its contents could have made more sense to some people. The bill re-emerged in February 2022 as c-11 and was passed by the Canadian House of Commons. Once the bill is passed into law, it is believed to give the Canadian Radio-Television and Telecommunications Commission (CRTC) the power to control what Canadians can see on Youtube and social media. This will also apply to user-generated content. One of CTRC’s criteria is inclusion and diversity in content. The bill is currently with the Canadian Senate and will be voted on in February. If it garners enough votes, then it will be debated by the Canadian parliament. There are high chances of the bill turning into law as big Tech giants such as Youtube have failed to convince the Senate to remove user-generated content from the bill.

UK’s Online safety bill

Unlike Canada, the Uk decided to give its bill a more friendly name. The bill was introduced in May 2021 and is yet to be passed into law. The bill’s goal is to give the UK government the power to censor whatever it considers harmful. In the UK, the regulator of the bill is the Office of Communications (OFCOM) which is similar to Canada’s CTRC. Legal but harmful content was excluded from the bull back in November. OFCOM will, h however, have the power to protect quote content of democratic importance and news publishers. It also plans to do age verification to prevent minors from accessing some information. It will be a requirement for Tech companies to do a KYC for their customers.

EU’s data governance Act                                                 

This was passed in the summer of 2022 and may be passed into law autumn this year. It will be mandatory to share data with the government. There will also be an artificial intelligence regulation act. Monopolies will be fined in a bid to make the EU competitive. It also aims to increase innovation in the digital markets. Every EU country will have a ministry of truth to censor certain information and fuel government propaganda. Illegal information will be taken down immediately. Offenders of the bill will be banned from the Digital Services Act. It will weed out hate speech, social media crises, etc.

United States

The US has two documents related to online censorship, the kids’ online safety act and the supreme court case. Kids will be protected from inappropriate content. The Federal Trade Commission FTC argued that parents must ensure their kids are safe online. Social media companies will have more liabilities as they will be under watch not to support any illegal activities, propaganda, or crime. Or else, they will have to deal with the supreme court according to section 230.


These bills could drastically change the way people consume the internet in these countries. Seeing that these countries are at the forefront of economic development, it will only be a matter of time before other countries join and start regulating the internet. Once these draconian bills are passed in these countries, they will get to decide what type of content will be considered inappropriate or needs to be moderated.-potentially resulting in a dystopian society with little or no freedom of expression.

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