bitcoin

Dips be damned, El Salvador is stronger thanks to Bitcoin


Since El Salvador adopted Bitcoin (BTC) as legal tender in September 2021, a number of quick judgments have been issued declaring the move a failure, with some experts going so far as to suggest that Bitcoin is somehow responsible for the economic challenges that existed. in El Salvador long before the creation of Bitcoin. But mainstream financial pundits, talking heads, and even International Monetary Fund (IMF) officials espousing this view completely miss the point.

After Salvadoran President Nayib Bukele announced in July his intention to offer to buy back publicly held bonds maturing between 2023 and 2025, El Salvador’s sovereign debt stood at more than $20 billion. While massive relative to the Salvadoran economy, it was unrelated to the decision to accept Bitcoin as legal tender.

On the contrary, a myriad of factors play into El Salvador’s debt. In 1982, 39 years before bitcoin was legalized, El Salvador borrowed $85 million from the IMF, adding significant tax debt and negligible benefits to its citizens in times of civil war. After that, the country’s decision in 2001 to make the US dollar its official currency further limited its ability to manage its own finances. With the USD as its base currency, El Salvador was unable to implement its own monetary policy to pay for domestic costs such as social programs or infrastructure. Instead, it was forced to increase public sector borrowing to fund these vital programs.

El Salvador’s debt challenges are not the result of the country’s investment in new financial technologies, such as Bitcoin. Instead, El Salvador’s adoption of Bitcoin is a step toward reclaiming its monetary sovereignty, providing its citizens with access to financial services and opportunities, and addressing the kinds of systemic issues that have historically deprived Salvadorans of their rights.

Since Bitcoin became legal tender last year, El Salvador has spent just over $100 million on Bitcoin. The new law stipulated that all businesses in the country would accept Bitcoin as a form of payment. Around the same time, the government also created a trust with $150 million in public funds to facilitate dollar conversions and launched its “Chivo Wallet” digital wallet, granting $30 in Bitcoin to citizens who exchanged it. download.

Related: Falling Bitcoin Price Doesn’t Affect El Salvador: ‘Now Is Time To Buy More’

By legalizing Bitcoin as legal tender, creating wallets for its citizens, and encouraging their use of these new tools with Bitcoin bonuses, the government has taken significant steps to give citizens more financial freedom and opportunities than they had never had one before. For example, at the time this legislation was passed, estimates suggested that up to 70% of the country’s citizens did not have bank accounts. The Bitcoin experience is elevating these citizens by providing a means for them to join the formal economy and creating opportunities for them to grow their wealth.

Although the timing of El Salvador’s commitment to Bitcoin as legal tender has unfortunately overlapped significantly with an industry-wide bear market, the rush to consider this a failure is, to say the least. premature. To judge the success of the experiment, it is crucial to consider its purpose and give the experiment the time it needs to run its course.

Basically, El Salvador undertook the bitcoin effort to usher in a new era of monetary sovereignty in the country and to provide citizens with financial opportunities that they did not have in the past and probably would not have. in the future. As a direct result of this effort, through the use of blockchain technology, millions of unbanked Salvadorans now have access to financial services and global financial markets.

Related: Tourists flock to El Salvador despite Bitcoin bear market

While others stand obediently on the sidelines waiting to see what happens, El Salvador has established itself as a leader in this movement that will likely spread to many other countries around the world. Countries like Venezuela and Guatemala – along with many others – may soon follow the path blazed by El Salvador, seeking progressive financial solutions based on blockchain technology to empower citizens and facilitate new eras of economic growth. and independence.

Contrary to the claims of critics who associate El Salvador’s economic problems with the adoption of Bitcoin, the adoption is a response to the intractable challenges that El Salvador and countries like it currently face, not the cause. The government of El Salvador has taken a courageous and laudable decision to give its citizens and, in fact, itself a chance at economic freedom. As citizens succeed with the financial tools that have been put in their hands, other countries will pursue their ambition to move into the next financial generation.

Bryan Hernandez is the president and co-founder of Structure.fi, a DeFi, crypto and traditional markets platform that recently launched in El Salvador. He is also the founder and CEO of Sonar Trading, a trading company that uses algorithmic strategies in the cryptocurrency markets. Bryan entered the fields of trading and investing after a career in computational biology at the Broad Institute of Massachusetts Institute of Technology and Harvard University, during which he published several articles in Nature, Cell and other peer-reviewed journals.

This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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