Home CryptocurrencyBitcoin Drops be damned, El Salvador is stronger thanks to Bitcoin

Drops be damned, El Salvador is stronger thanks to Bitcoin

by SuperiorInvest

Since El Salvador adopted Bitcoin (BTC) as legal tender in September 2021, several quick judgments were issued declaring the move a failure, with some scholars going so far as to suggest that Bitcoin was somehow responsible for the economic problems that existed in El Salvador long before Bitcoin was created. even created. However, traditional financial experts, talking heads and even representatives of the International Monetary Fund (IMF) who espouse this point of view are completely missing the point.

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

Rather, 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 to its massive fiscal debt and providing negligible benefits to its citizens during a time of civil war. Then, 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 the 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 pay for these vital programs.

El Salvador’s debt problems are not the result of the country’s investments in new financial technologies like Bitcoin. Instead, El Salvador’s adoption of Bitcoin is a step toward regaining its monetary sovereignty, giving its citizens access to financial services and opportunities, and addressing the kinds of systemic issues that have historically disenfranchised Salvadorans.

Since Bitcoin became legal tender last year, El Salvador spent a little more than $100 million on bitcoins. The new law stipulated that all businesses in the country would accept bitcoins as payment. Around the same time, the government also created a trust with $150 million in public funds to facilitate dollar transfers and launched its digital wallet “Chivo Wallet” which provides $30 in Bitcoins to citizens who download it.

Related: Falling Bitcoin Price Doesn’t Affect El Salvador: ‘Now is the Time to Buy More’

By legalizing Bitcoin as legal tender, establishing wallets for its citizens, and incentivizing the use of these new tools with Bitcoin bonuses, the government has taken significant steps to give citizens more financial freedom and opportunity than they ever had before. For example, at the time this legislation was passed, estimates suggested that up to 70% of the country’s citizens lacked bank accounts. The bitcoin experiment elevates these citizens by providing a way for them to join the formal economy and create opportunities for wealth growth.

While the timing of El Salvador’s commitment to bitcoin as legal tender unfortunately overlapped substantially with an industry-wide bear market, the rush to dismiss it as a failure is premature, to say the least. In order to judge the success of an experiment, it is important to consider its purpose and to give the experiment the appropriate time to run.

At its core, El Salvador has embraced the Bitcoin effort to usher in a new era of monetary sovereignty in the country and provide citizens with financial opportunities they haven’t had in the past and likely won’t have in the future. As a direct result of these efforts, millions of unbanked Salvadorans now have access to financial services and global financial markets through blockchain technology.

Related: Tourists flock to El Salvador despite bitcoin bear market

While others stand meekly on the sidelines and wait to see what happens, El Salvador has emerged as the leader of this movement that is likely to spread to many other nations around the world. Earth including Venezuela and Guatemala — like many others — may soon follow the path forged by El Salvador, seeking progressive financial solutions built on blockchain technology to empower citizens and facilitate a new era of economic growth and independence.

Contrary to the claims of critics who link El Salvador’s economic problems to the adoption of Bitcoin, the adoption is the answer to the intractable challenges currently facing El Salvador and countries like it, not the cause. The government of El Salvador has taken a bold and commendable step to give its citizens, and indeed itself, a chance at economic freedom. As citizens find success with the financial tools put into their hands, other countries will follow suit in their ambitions to step into the next generation of finance.

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 firm that uses algorithmic strategies in the cryptocurrency markets. Bryan entered the field 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 and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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