How the introduction of cryptocurrencies is changing the state by the example of El Salvador
Cryptocurrency at the head of the state. Or rather, cryptocurrency as an official means of payment. Is it possible? Crypto enthusiasts will say that it is inevitable and the potential of cryptocurrencies is too great. Skeptics will pull out crypto volatility charts again with a disgruntled look on their faces. However, the issue of international recognition of cryptocurrencies is being talked about more and more.
So far, it is difficult to predict how a still innovative financial instrument can change realities on a global scale, or at least a single country. Bitcoin is only 13 years old, remember, while the usual financial institutions and mechanisms have been built and developed for centuries.
Will crypto remain the destiny of dreamers, or does it have prospects to make a global step forward? If you have not forgotten about El Salvador, now is the time to turn your attention to this country in search of answers. Surely everyone has heard that El Salvador became the first country to recognize Bitcoin as official tender this summer, along with the U.S. dollar (the native currency was phased out in 2004). However, not everyone is clear on what happened next.
And it’s been almost half a year now. Has Bitcoin changed an entire country for the better? We’ve compiled the news and identified key trends to model the chances of cryptocurrency legalization around the world on the example of this small but proud country.
Why El Salvador has made Bitcoin an official currency
First of all, let us remember why El Salvador decided to take this step. First of all, we are talking about a poor country where most of the working-age population goes to wealthy countries to work. There are almost no jobs inside the country, and the economy relies on foreign infusions. Bitcoin has become a tool to facilitate these flows.
In a sense, it is a forced measure. We want to emphasize that El Salvador’s situation should not be considered a universal axiom, but one possible facet of events. We should not superimpose the experience of that country on the experience of developed economies, but it is worth considering. The only clear illustration of crypto processes at the state level.
What’s the key Bitcoin news in El Salvador right now?
The country is buying Bitcoin and getting injections into the economy through its skyrocketing exchange rate
Since late summer and early fall, El Salvador’s treasury has added hundreds of Bitcoins. The government believes in the project and buys crypto for dollars. BTC “repays” El Salvador with a favorable exchange rate. The income helps the country invest the money to improve people’s lives right now and to buy more Bitcoins to exaggerate the benefits in the future.
For example, a purchase of 420 BTC was made on Oct. 28, 2021, and 100 BTC was bought on Nov. 26, amid a slight decline in price. It’s a bargain, knowing the graphs of its recent value changes. In total, the country owns more than 1,200 Bitcoins at the end of 2021 and has no intention of stopping.
Salvadorans are buying more BTC
It seems that, following the government’s faith in the crypto future, a wave of enthusiasm is beginning to pull in ordinary citizens as well. Statistics from the middle of this fall show that Salvadorans are investing more dollars in buying Bitcoin than they are making transactions in the opposite direction. The data is recorded through Chivo’s national network of currency exchange machines, which has about 200 currency exchange outlets across the country. On average, there are about $3 million in requests per day. That’s tens of thousands of transactions.
Schools and a $4 million veterinary clinic
The Salvadoran government seems to have chosen the right tactics to use cryptocurrency. They do not just accumulate income from market fluctuations, but invest the earned money in the development of the country here and now. For example, it became known about the launch of a project to build 20 new schools in the country. All costs are covered by recent profits from Bitcoin, owned by the country. A little earlier, El Salvador invested $4 million to build a new veterinary clinic in the country’s capital. It is rumored that similar projects will be launched one after another in the near future.
Innovation and the path to the future
In addition to controlling the country’s present, El Salvador is looking to the future. For example, the country plans to develop a new part of the economy and is already launching an innovative project to create a geothermal mining farm. Once invested in oil in the Middle East, the same thing is happening today in El Salvador with crypto. The country is already ready to invest in technology development in order to gain an advantage in the future, as Arab countries have successfully done in the last 20–30 years. A particularly interesting proof of this trend was the recent information about the ambitious Bitcoin City project, a new technological city that will be connected to the aforementioned geothermal energy and become a center for the development of innovative and, among other things, cryptocurrency initiatives.
El Salvador inspires faith in the cryptocurrency future. In six months, there has been a lot of inspiring news from this country, where the government has “figured out the trend” and is doing everything it can for the present and future of its country. Will these changes be effective? For now, it all depends on the Bitcoin exchange rate. At best, it is development and prosperity for El Salvador according to the chosen rate and, in the long term, complete independence from cryptocurrencies and prosperity. At worst, if the crypto market goes down, the country will be left with all that is invested in the country purely through current profits. And that’s not insignificant, either. We mean a gradual decline in price, not a sharp collapse. The market has recently been showing us that extreme volatility risks for Bitcoin and all other altcoins are a thing of the past. Cheer for El Salvador!