El Salvador adopted Bitcoin ( BTC) in September 2021 as its legal tender. There have been several quick judgments declaring the move a failure. Some pundits even suggested that Bitcoin might be responsible for the economic problems that El Salvador faced long before Bitcoin was created. This view is being promoted by traditional financial experts, talk heads, and even representatives of the International Monetary Fund.
In July, Salvadoran President Nayib Bukele announced that he would offer to buy bonds from the public. El Salvador’s sovereign debt amounted to more than $20 billion. Although it was a significant amount in relation to the Salvadoran economy, the transaction was not related to the acceptance of Bitcoin as legal tender.
Rather, myriad factors play into El Salvador’s debt. El Salvador borrowed $85million from the IMF in 1982, 39 years prior to the legalization and acceptance of Bitcoin. This added considerable fiscal debt and provided negligible benefits for its citizens during civil war. The country’s 2001 decision that the United States dollar would be its official currency severely limited its ability manage its finances. El Salvador couldn’t implement its own monetary policies to pay for its domestic costs, such as infrastructure or social programs, because it used USD as its currency of choice. To pay for these essential programs, El Salvador was forced to borrow more from the public sector.
The country’s problems with debt are not due to its investment in financial technology, such as Bitcoin. El Salvador’s adoption Bitcoin is an attempt to regain its monetary sovereignty, provide its citizens with financial services and opportunities, as well as address the systemic issues that historically have disenfranchised Salvadorans.
El Salvador has spent just over $100 million on Bitcoin since made Bitcoin legal tender last year. All businesses within the country were required to accept Bitcoin payments under the new law. The government created a trust with 150 million dollars in public money to facilitate dollar conversions. also launched its digital wallet called “ChivoWallet” which grants $30 in Bitcoin to anyone who downloads it.
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The government has made significant progress in granting citizens greater financial freedom and opportunities by legalizing Bitcoin and setting up wallets for citizens. At the time of this legislation, it was estimated that as many as 70% were without bank accounts. These citizens are being lifted by the Bitcoin experiment, which allows them to become part of the formal economy and creates opportunities to increase their wealth.
Although El Salvador’s decision to accept Bitcoin as legal currency coincided with a bear market in the industry, it is not premature to conclude that this was a failure. It is important to evaluate the experiment’s success and allow it to run its course.
El Salvador set out to create a Bitcoin economy to bring about a new era in national monetary sovereignty and provide citizens with financial opportunities that they didn’t have before and won’t have again. This effort has resulted in millions of Salvadorans being able to access financial services and the global financial markets through the use blockchain technology.
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El Salvador is leading the charge in this movement, which will be seen as an example to many other countries. El Salvador has set a path for countries such as Venezuela and Guatemala to seek out progressive financial solutions based on blockchain technology that empower citizens and enable new eras economic growth and independence.
Contrary to critics’ claims that El Salvador’s economic problems are linked to Bitcoin adoption, the adoption is actually a response to the difficult challenges El Salvador and other countries face currently, not the cause. El Salvador’s government has taken a courageous and admirable step to offer its citizens, and indeed itself, a chance at economic liberty. Other countries will be inspired by the success of El Salvadorans with the financial tools they have.
Bryan Hernandez, the president and cofounder of Structure.fi. This DeFi, Crypto and Traditional Markets platform was launched in El Salvador recently. Sonar Trading is also his company’s founder and CEO. Sonar Trading uses algorithmic strategies to trade in crypto markets. After a career as a computational biologist at Harvard University and the Broad Institute of Massachusetts Institute of Technology, Bryan began his journey in investing and trading. He published numerous articles in Cell, Nature and other peer reviewed journals.
This article is intended for informational purposes only and is not meant to be or should be interpreted as investment or legal advice. These views, thoughts and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.