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29 March 2024
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Bitcoin: skepticism about adoption in El Salvador


Bitcoin will definitely and effectively become legal tender in El Salvador next week .

The country has not had its own national currency for some time, and in fact uses the US dollar as a common currency. In recent times, however, more and more Salvadorans are still using bitcoin, especially for remittances that are sent from abroad, and which constitute a decidedly significant part of the national GDP.

Bitcoin legal currency in El Salvador

So starting next week the country will have two fiat currencies, namely the US dollar and BTC.

However, there are still many people skeptical about this innovative and curious decision.

The Guardian reports that a series of technological, financial and criminal challenges threaten to sink President Nayib Bukele’s plan , which is to guide the country’s economy out of its current troubled waters on the wave of cryptocurrencies.

While this seems to be the plan, the mere introduction of bitcoin as a legal tender in the country does not necessarily have to produce such results.

That is, a clear distinction should be made between what the current political leader of the country wants, and what the citizens want, and between the inevitable distorted narrative of political propaganda, and the description of the real living conditions of Salvadorans.

In other words, politicians come and go, and any political propaganda campaign is bound to have a (often short) end, but bitcoin remains. Therefore, rather than focusing on the eventual success of Bukele’s political initiative, we should instead focus on the real long-term effects of such a decision, which in reality is completely outside the political career of the current president.

Risks associated with Bitcoin

Be that as it may, the challenge is there, and it is real, given that for example the country still suffers too often from power blackouts that make digital currencies completely unusable. However, for example, this also applies to US dollars, except for the use of physical banknotes and coins.

Another problem is the volatility of the price of BTC in dollars, which for now can only be solved by allowing very rapid changes from bitcoin to dollars.

Many problems related to the concrete daily use of BTC already have solutions, but it is difficult to imagine that it can be easy to adopt them in a country like El Salvador. It will probably just take some time, and don’t expect everything to go smoothly from the first moment.

Some, on the other hand, are objectively difficult to resolve, such as those linked to the risk of transforming the country into a center for money laundering. 

This was stated, for example, by the local economist Ricardo Castañeda, according to whom the president did not fully understand the implications of the new law that makes bitcoin legal tender in the country, and in particular the risk of “converting the country into a recycling paradise. of money”.

On the other hand, Central America is already widely known for being populated by various tax havens, and in this El Salvador could be no exception.

In addition, the Guardian also reports that the regulatory framework for law enforcement has yet to be published, and there are rumors that there may be delays. Add to this that Moody’s downgraded Salvadoran debt over fears of “weakened governance”, and the IMF, which is expected to grant a $ 1 billion loan, is skeptical.

In cases like these, however, it is quite obvious that there is skepticism, given that uncertainty and absolute novelties always inevitably generate doubts, and therefore fears.

The reaction of the population

That said, it is estimated that around two-thirds of the country’s inhabitants are unwilling to accept BTC as a means of payment, at least for now.

But looking at the situation from another point of view, the fact that more than 30% of the population is willing to accept bitcoin, and that many are already actually using it to send remittances from abroad, actually seems to indicate a possible good start. , that is a first small but significant step on a path that promises to be long and tortuous, but absolutely viable.

Probably trying to judge this initiative even before it is put into practice is wrong, and perhaps it would be appropriate to wait at least a few months before expressing any kind of judgment about it, also because in the past Bitcoin has managed to amaze several times by going well. beyond the expectations of the skeptics.

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