El Salvador’s political and economic ties to the US make any significant changes. El Salvador’s move will be intriguing to watch and see whether others follow. El Salvador made headlines by adopting Bitcoin as its currency. This remarkable decision will help many folks.
70% of El Salvadorans lack bank accounts, according to PwC. However, 9.94 million people—156.5%—have cell phones. Thus, a smartphone-only monetary system may be beneficial. According to the World Economic Forum, remittances account for almost 20% of GDP. Bitcoin might save money on international wire transfer fees.
To fight poverty and help unbanked residents, El Salvador accepted Bitcoin as its official currency. By giving residents smartphone access to digital cash, the government sought to boost economic prospects. They’d get new financial services. Reducing inflation risk would also stabilize the economy.
Bitcoin’s easy government monitoring might potentially reduce money laundering and corruption. Bitcoin may attract international investment, boosting economic growth.
El Salvador has seen political turbulence since embracing bitcoin. There is government instability, political party strife, and economic uncertainty. Despite instability and rising gang violence, Tourism rose 30% in 2022.
New digital services and prospects may not have caught on. El Salvador’s poverty rate is 26.6%, more than before Bitcoin became legal money. Cryptocurrencies account for less than 2% of overseas remittances. Tourism’s GDP boost looks negligible.
Bitcoin volatility has had global effects. These have been especially painful during currency declines. Bitcoin hasn’t recovered from September 2021, when El Salvador started buying. Bitcoin has risen to $28,000 from $45,000.
The Wall Street Journal said El Salvador’s Bitcoin pioneers Max Keiser and Stacy Herbert started a successful financial news show on Russian state television. They profited from the crypto explosion. They founded a crypto exchange that manages Bitcoin-linked sovereign debt sales in El Salvador. They also advise the Salvadoran government on Bitcoin and crypto investments.
In 2021, the pair visited El Salvador and were interested in cryptocurrency ventures there. They’re conflicted. If El Salvador adopts Bitcoin, they will profit. Crypto has had ethical conflicts before. Governments are addressing it because of the lack of global legislation. More governments will need to act as people misuse Bitcoin and other assets. These laws may assist or hinder the sector.
US states have advocated crypto mining bans. The SEC has punished several firms and people for improper behavior. Federal legislators seek to outlaw crypto. This animosity may spur innovation elsewhere. It’s unclear if El Salvador would benefit.
Two years is not enough time to fully accept a new currency. Spanish-language bitcoin books are rare. The asset and its operation seldom reach lower-income people, regardless of location. 10,000 students studied cryptocurrencies in 2022. Continued education may boost adoption as young people learn and utilize the technology.
El Salvador is a pioneer in cryptocurrency adoption, and its success (or failure) might influence other nations to contemplate legalizing digital currencies. As we look to El Salvador’s future, it’s evident that politics have influenced the currency debate. Depending on the outcome, other nations may be encouraged or deterred from launching cryptocurrency ventures.