Thanks to El Salvador's daring move, digital money is high on the radars of policymakers around the world.
On September 7, in a historic event, the small Central American nation of El Salvador adopted Bitcoin as its legal tender.
The true significance of this day to the way people around the world exchange value and the meaning they attach to the concept of money will take some time to be fully reified and understood. However, what is already clear is that September 2021 will be next to January 2009 in the history books of the digitization of finance.
Surrounded by controversy, protests, a complicated deployment of infrastructures, what else? But also by the joy and optimism of millions of people around the world who see this great experiment with hope, "Bitcoin Day" marked the first case of a sovereign state that makes a decentralized digital asset its national currency. Was it a success, after all?
Politics behind the scenes
El Salvador, a nation of less than 7 million people, has long given up on claiming its monetary sovereignty . In 2001, it ditched the colón, its national currency in use for more than a century, in favor of the US dollar. The measure made a lot of sense from a practical point of view, since the share of remittances (a good part of them coming from Salvadorans living in the United States) in the country's gross domestic product exceeded 16% at peak times.
At that time, then-President Francisco Flores Pérez's move sparked protests and was condemned by detractors who claimed it was undemocratic and supposedly benefited the bankers and the wealthy.
Two decades later, President Nayib Bukele (a 40-year-old man who came to power at the head of a party called New Ideas) added another chapter to El Salvador's monetary novel, this time, complementing a foreign currency circulating in the country. with one without borders.
Like 20 years ago, there have been negative reactions in relation to the Bitcoin Law. However, the same surveys showing a lack of support for Bitcoin ( BTC ) as a new means of payment suggest that a large portion of Salvadorans have a limited understanding of what it is and how it will affect their lives.
Furthermore, in many cases, resentment towards Bitcoin may be related to resentment towards Bukele, who, despite his strong approval ratings, remains a divisive figure whose alleged autocratic tendencies concern some international observers.
In summary, there are good reasons to believe that there is no powerful ideological opposition to the concept of decentralized finance in El Salvador, and any resistance that currently exists will likely dissipate further down the adoption curve (if the implementation turns out to be a resounding success).
The uproar in the country
Meanwhile, the somewhat hasty launch of the payments infrastructure was, unsurprisingly, far from perfect. The government-run Chivo wallet was down for several hours, and some retail workers didn't know how to process BTC payments. Shortly after launch, the president himself took on the customer support role, tweeting updates on the status of the wallet's service.
Overall, however, based on feedback from those who were there to witness El Salvador's first steps as a "Bitcoin nation", things started to calm down soon after a turbulent start. Bart Mol, founder, and host of the " Satoshi Radio " podcast tweeted his experience from Chivo's ATMs not working to successful Lightning transactions to pay for pizza and coffee at different points of sale.
The general feeling, Mol concluded, was to "witness history."
International response
The institutions of the global financial system seem less enthusiastic. The International Monetary Fund has been passive-aggressive regarding El Salvador's Bitcoin Law since it was passed earlier this summer. Perhaps, if this experiment yields favorable results, the IMF and other global financial organizations will jump on the bandwagon?
Some legal professionals are skeptical of this prospect. During an "Ask Me Anything" (AMA) session on Discord with Cointelegraph Markets Pro subscribers last week, Cointelegraph General Counsel Zachary Kelman opined that global financial institutions are unlikely to jump on the Bitcoin bandwagon as National currency:
"The cited reasons (environment and transparency) for opposing the adoption of BTC by El Salvador are not the real reasons, which is the threat that the development of cryptocurrency poses to the established global political order and the banking system. Therefore I don't think these international bodies are widely supporting Bitcoin. "
However, other nation-states are watching closely. It is true that El Salvador's position as the leader in remittances in the region, combined with its previous experience in outsourcing the national monetary function to a foreign currency, constitutes a rare combination. Most other countries have to rise to a higher bar, even if they could muster the political momentum to make a decentralized token recognized as legal tender.
Still, the possible favorable effects of El Salvador's move could prompt other countries to consider Bitcoin more seriously as a means of payment. Amanda Wick, head of legal affairs at blockchain analytics firm Chainalysis, told Cointelegraph that cryptocurrency development is an ideal technology for remittances and is therefore well-positioned to serve economies that handle many remittances:
"Many citizens [in El Salvador] do not have access to traditional financial services, and this could drive financial inclusion. These drivers can give us an idea of which countries can follow suit. In our research, we have found that these use cases are already popular in countries in Latin America, Africa, and Southeast Asia in particular. "
The acceleration of the digital currency research programs of the central banks of other countries, the push to define the legal status of cryptocurrencies in Ukraine, and the discussions to make cryptocurrencies a legal alternative payment method in Panama can be seen as carryover effects of El Salvador's daring initiative.
Obviously, not all states are in a position to adopt Bitcoin as their national currency. But on September 7, virtually everyone was driven to rethink their position on the world's digital money map.
Regardless of the outcome of El Salvador's experiment, the pioneering example of the Central American nation has already brought cryptocurrency to the mainstream political agenda more than it could achieve without the recognition of a sovereign state.
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