At Global First, El Salvador Adopts Bitcoin as Currency


CITY OF MEXICO – El Salvador on Tuesday became the first country to adopt bitcoin As legal tender, it allows the cryptocurrency to be used in any transaction, from buying a cup of coffee to paying taxes.

The bold move, widely celebrated by the international bitcoin community, has found a more skeptical welcome at home and in the traditional financial world amid concerns it could introduce instability and unnecessary risk to the Central American nation’s fragile economy.

President Nayib Bukele, a tech-savvy millennial, supported the adoption of digital currency and promoted it as a way to bring in more Salvadorans. 70 percent The entry of those without a bank account into the official economy. He argues that using cryptocurrency would make it faster and cheaper to receive remittances from abroad, and could free the debtor nation from the clutches of the traditional global financial system.

Putting Bitcoin to legal tender, along with the dollar the country has relied on since 2001, is part of Mr. Bukele’s appeal to crypto entrepreneurs, who often seem to be his primary target audience.

The country plan came to light when Mr. Bukele announced it in English at a Bitcoin conference in Miami. Days later, as Congress voted to approve the measure, the president chatted with American crypto enthusiasts. a social media hangout.

Many in El Salvador watch this movement with confusion and distrust, fearing the inherent volatility of the movement. virtual tokens without physical support, which ones suitable for rising and bumping In terms of value, it can be dangerous to the economy and their own savings.

“We really don’t know how this system will work,” said Evelin Vásquez, 52, who sells cell phones in the capital San Salvador, and knows that fluctuations in Bitcoin’s value can wipe out her savings.

“You could lose what you invested and gain nothing,” he added.

Financial analysts are concerned that this instability will ripple through the entire economy.

“The thing to avoid when El Salvador accepted the dollar was to have this risky exchange rate volatility,” said Jaime Reusche of Moody’s ratings agency. old version El Salvador in July, in part because of the Bitcoin law. “This clearly has no precedent.”

In a little over a decade, the development of Bitcoin and thousands of other cryptocurrencies has changed the definition of money and transform financial services, scrambling to catch up with authorities around the world.

El Salvador’s move puts it at the forefront of a revolution in blockchain finance. parallel universe The number of crypto-based alternative banking services is growing and Alert the authorities in Washington and beyond.

It is not clear how everything will develop.

The new law requires all businesses to accept Bitcoin as payment. The government will also establish a trust 150 million dollars in public funds to facilitate dollar conversions, among other things.

To encourage the use of Bitcoin, the government has launched a digital wallet called “Chivo”, Salvador’s cool slang, and will pay them a $30 Bitcoin bonus. download citizens he. Salvadorans will also be able to withdraw cash from 200 ATMs and 50 information centers across the country. According to Mr. Bukele.

But only about a third Salvadorans use the internet and almost a quarter living below the poverty line. According to a study, many said they have little intention of using Bitcoin. current research In the newspaper La Prensa Gráfica.

Enthusiasm from abroad also seems futile to some who have heard echoes of financial colonialism in El Salvador, which the global crypto movement claims is undermining.

“For them, El Salvador just seems like a tool to promote their cryptocurrencies,” said Tatiana Marroquín, a Salvadoran economist. “El Salvador is not just a destination – the end of El Salvador for us.”

Jerry Brito, of the crypto research group Coin Center in Washington, said that even some Bitcoin advocates are wary: There are “obvious contradictions” in a national government’s official adoption of a currency designed to circumvent government control over money.

International financial regulators have also expressed legal concerns. The World Bank and the International Monetary Fund think differently. financing agreement Along with El Salvador, they said that adopting Bitcoin could leave a country open. money laundering and other illegal financial activities.

El Zonte, a coastal village in El Salvador, litmus test For national adoption of the currency after an anonymous donor started seeding Bitcoin in the community in 2019. During the adoption of Bitcoin among residents mixed up, some locals are adamant about the success of the experiment.

Naotoshi Yamasaki, a surfer, said that Bitcoin ATMs may run out of dollars quickly, but overall the project is working.

“We all use Bitcoin,” he said, despite the awareness that with cryptocurrency, your money can “increase just as it can go down.”

This volatility is one of the many barriers to applying the lessons of a sleepy seaside town to a national financial system. Bitcoin price fluctuations can challenge the government’s ability to meet conversion needs. George Selgin, a monetary economist at the Cato Institute, argues that if the trust fund is liquidated, it could leave the bag in the hands of taxpayers.

But crypto advocates say Bitcoin is the first step into a bigger world. alternative financial services This could make it easier to receive remittances from abroad, which Salvadorans increasingly trust, and could attract investors.

Matthew Sigel, head of digital asset research at global wealth management firm VanEck, has questions about how the government fund will work, but believes that cryptocurrency can help El Salvador “get rid of the yoke of dollar colonialism,” perhaps with creative investment vehicles that bypass the traditional. channels and Bitcoin mining operations those who use natural resources.

According to many observers, this move tendency towards autocracy.

A charismatic young leader who uses social media to gather followers and argue with enemies, Mr. Bukele is increasingly using his control over the country to concentrate power and silence his opponents.

Last week, Mario Gómez, an outspoken critic of Bitcoin law, said: briefly detained without a warrant and their mobile phones were confiscated by the police.

“There is a deterioration in freedom of the press and freedom of expression,” said Otto Flores, the lawyer representing Mr. Gómez. “It’s alarming – you can’t deny that.”

A government spokesperson declined a request for comment. national police said on Twitter He said Mr Gómez was being investigated for “financial fraud”.

Mr. Bukele is determined in the face of criticism. “Salvadorans already know me and they know that I would never do anything that wasn’t in their best interest,” he said. said on Twitter In June.

And despite widespread opposition to Bitcoin, the president remains sky-high in popularity, with 85 percent approval, according to a poll last week. La Prensa Grafica.

With such support and absolute control over the levers of power, it is unlikely that anything will stop Mr. Bukele’s plans for Bitcoin or any other reform.

“The regime has very strong control,” said Noah Bullock, executive director of Cristosal, a human rights organization. “She is everything.”

Nelson Renteria contributed news from San Salvador.


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