This is just flat wrong on so many levels it's hard to know where to start. First, as anyone who has been trading for more than a nanosecond SHOULD know, the ONLY way to ensure that shares cannot be used for borrowing is to hold them in a cash account. Second, if you do hold shares in a cash account, there is NO advantage (and there are several disadvantages) to physically holding share certificates. Any long who did call for shares in advance of any catalyst, for example, would be unable to trade those shares in time to capitalize on that catalyst.
Secondly, retail shares are a very small percentage of shares available for borrowing; holding those shares back will not materially effect the short-selling process (many of the institutional shorts borrow shares from themselves in any event, and many of the HFT shorts are naked and NEVER cover because it's virtually impossible for the SEC to enforce regulations in the HFT arena). These are just some of the reasons that the great mythical "short squeeze" so rarely develops - the institutions are just not leveraged enough to have to respond to even sustained runs in price (unless someone screws up royally).
What you CAN do to protect yourself is to remove stop-losses from any shares that you hold in order to prevent stop-loss cascades - or at least prevent your shares from being snapped up as the result of a stop loss trigger. If you are opposed in principle to share borrowing, hold your shares in a cash account.
Last: Cyprus? Really??? Cyprus is one in a long line of "crises" which the major financial institutions count on in order to hedge their positions. The whole London Whale thing was the result of a phenomenally badly managed bet that the Euro was going to tank last spring. Get a grip.
If a bank failure or bank run were to occur People's SRPT shares could b seized and frozen as part of a bank holiday. Look at MF GLobal. Those investors were cleaned out
Shares r not safe in a cash account as counterparty risk exists as the shares ar held by over leveraged, undercapitalized banks. The shadow banking system and risks to fiat assetts are a clear and present danger