Is the legalization of bitcoin in El Salvador a step everyone has been waiting for?
Bitcoin cryptocurrency became legal tender in one of the Latin American countries this week.
The state of El Salvador became the first country in the world whose authorities decided that bitcoin can be used to pay taxes, buy food, purchase real estate - everything that is taken for granted for the standard "fiat" (state) currency.
The state of El Salvador became the first country in the world whose authorities decided that bitcoin can be used to pay taxes, buy food, purchase real estate - everything that is taken for granted for the standard "fiat" (state) currency.
Can this change the world? It is difficult to answer unequivocally.
Bitcoin has libertarian roots. The main idea of cryptocurrency is related to the departure from the institutions of power and centralization to ensure free exchange, bypassing all borders.
El Salvador, which recently adopted bitcoin as legal tender, is certainly not a state embodying a libertarian utopia.
For example, shortly before bitcoin became legal tender, a resident of El Salvador was released from prison, where she spent nine years on suspicion of abortion. And this is still luck, since she was originally sentenced to 30 years in prison.
It is worth mentioning that the country is currently ruled by Naib Bukele. He is young (39 years old, that is, much younger than other leaders in the world), a populist (for this reason, he is always compared to Donald Trump), a pseudo-dictator (he came to power as a result of elections, but last year he forced the army to take control of Congress) ...
Now he has pushed through a law that made bitcoin legal tender. He even changed his Twitter avatar, adding the effect of "laser eyes" - this is how fans of cryptocurrency refer to themselves on this social network.
Bitcoin has libertarian roots. The main idea of cryptocurrency is related to the departure from the institutions of power and centralization to ensure free exchange, bypassing all borders.
El Salvador, which recently adopted bitcoin as legal tender, is certainly not a state embodying a libertarian utopia.
For example, shortly before bitcoin became legal tender, a resident of El Salvador was released from prison, where she spent nine years on suspicion of abortion. And this is still luck, since she was originally sentenced to 30 years in prison.
It is worth mentioning that the country is currently ruled by Naib Bukele. He is young (39 years old, that is, much younger than other leaders in the world), a populist (for this reason, he is always compared to Donald Trump), a pseudo-dictator (he came to power as a result of elections, but last year he forced the army to take control of Congress) ...
Now he has pushed through a law that made bitcoin legal tender. He even changed his Twitter avatar, adding the effect of "laser eyes" - this is how fans of cryptocurrency refer to themselves on this social network.
Is the legalization of bitcoin in El Salvador a step everyone has been waiting for?
Let's add one more important fact: El Salvador does not have its own currency, until 2001 the country used the “column”, but then abandoned it and preferred to use the US dollar.
The government uses dollars, but it cannot influence US monetary policy (which the Federal Reserve does) and does not receive any benefit from US fiscal policy (i.e. El Salvador does not receive any money directly from US taxpayers). The rules regarding the US dollar are in the interests of the United States, not El Salvador.
For some countries, especially unstable ones with poor farm management, pegging to a more stable currency is worth sacrificing that control. But in this case, it is a sacrifice, there is no doubt about it.
The government uses dollars, but it cannot influence US monetary policy (which the Federal Reserve does) and does not receive any benefit from US fiscal policy (i.e. El Salvador does not receive any money directly from US taxpayers). The rules regarding the US dollar are in the interests of the United States, not El Salvador.
For some countries, especially unstable ones with poor farm management, pegging to a more stable currency is worth sacrificing that control. But in this case, it is a sacrifice, there is no doubt about it.
Sovereign currency is a valuable thing: you can print your own money, issue debt obligations in it, and still maintain sufficient confidence in the money.
It provides wiggle room (or a rope of sufficient length to hang oneself, as every reserve currency issuer in history realized too late).
This is why countries with sovereign currencies are especially keen on the idea of competition from digital currencies (independent, decentralized like bitcoin, and competing digital currencies supported by the state, such as China's digital yuan).
It provides wiggle room (or a rope of sufficient length to hang oneself, as every reserve currency issuer in history realized too late).
This is why countries with sovereign currencies are especially keen on the idea of competition from digital currencies (independent, decentralized like bitcoin, and competing digital currencies supported by the state, such as China's digital yuan).
However, if control over your own currency is already lost, why not adopt another? Specifically, a country's currency with at least a predictable monetary policy. Bitcoin is a "hard" currency, since there is a limit on its quantity and speed of "printing".
So from this point of view, the adoption of the cryptocurrency by El Salvador does not have a direct impact on the overall state of affairs.
Let's ask ourselves what might have happened if awareness of bitcoin and cryptocurrencies had been higher in the early days of the eurozone sovereign debt crisis?
Would Greece see it as a potential solution to its currency issue? The fear of leaving the eurozone was what ultimately kept Greece in the EU at the time.
So from this point of view, the adoption of the cryptocurrency by El Salvador does not have a direct impact on the overall state of affairs.
Let's ask ourselves what might have happened if awareness of bitcoin and cryptocurrencies had been higher in the early days of the eurozone sovereign debt crisis?
Would Greece see it as a potential solution to its currency issue? The fear of leaving the eurozone was what ultimately kept Greece in the EU at the time.
Currencies are often the biggest sticking point. If the population is convinced that digitization or bitcoinization is in some way a less painful alternative to leaving the monetary union, then this will affect politics around the world.
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