To hell with the dips, El Salvador is stronger thanks to Bitcoin

Since El Salvador adopted Bitcoin (BTC) as legal tender in September 2021, a series of swift rulings have been issued declaring this move a failure, with some experts going so far as to suggest that Bitcoin is somehow responsible for the economic challenges that existed in El Salvador well before Bitcoin was even created. But traditional financial experts, talking heads and even representatives of the International Monetary Fund (IMF) who espouse this view are completely unknown.

After Salvadoran President Nayib Bukele announced in July his plan to offer the repurchase of public bonds maturing between 2023 and 2025, El Salvador’s sovereign debt totaled more than $ 20 billion. Of course, a huge amount compared to the Salvadoran economy 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 a large tax debt and providing negligible benefits to its citizens during a period of civil war. Subsequently, the country’s decision in 2001 to make the US dollar its official currency further limited its ability to manage its finances. With the USD as its base currency, El Salvador was unable to implement its own monetary policy to pay for internal costs such as social programs or infrastructure. Instead, it was forced to increase public sector debt to pay for these vital programs.

El Salvador’s debt-related challenges are not the result of the country’s investments in new financial technologies, such as Bitcoin. Instead, El Salvador’s adoption of Bitcoin is a move towards regaining its monetary sovereignty, providing its citizens with access to financial services and opportunities, and addressing the kind of systemic problems that have historically deprived Salvadorans.

Since becoming legal tender in Bitcoin last year, El Salvador has spent just over $ 100 million on Bitcoin. The new law stipulated that all companies in the country would accept Bitcoin as payment. Around the same time, the government also created a trust fund with $ 150 million in public funds to facilitate dollar conversions and launched its “Chivo Wallet” digital wallet, granting $ 30 in Bitcoin to citizens who they download it.

Related: Bitcoin price drop does not affect El Salvador: “Now is the time to buy more”

By legalizing Bitcoin as legal tender, creating wallets for its citizens and incentivising their use of these new tools with Bitcoin bonuses, the government has taken significant steps to give citizens more freedom and financial opportunities than they ever had before. For example, at the time of passing this legislation, estimates suggested that up to 70% of the country’s citizens did not have bank accounts. The Bitcoin experiment is elevating these citizens by providing them with a way to join the formal economy and creating opportunities to grow wealth.

While the timing of El Salvador’s commitment to Bitcoin as legal tender has sadly overlapped substantially with an industry-wide bear market, the rush to consider this a failure is, to say the least, premature. To judge the success of the experiment, it is crucial to consider its purpose and give the experiment enough time to run its course.

At its core, El Salvador embarked on Bitcoin’s effort to usher in a new era of monetary sovereignty in the nation and to provide citizens with financial opportunities they did not have in the past and likely would not in the future. As a direct result of this effort, through the use of blockchain technology, millions of bankless Salvadorans now have access to financial services and global financial markets.

Related: Tourists flock to El Salvador despite Bitcoin’s bear market

While others meekly stand aside waiting to see what happens, El Salvador has made a leader in this movement that is likely to spread to numerous other nations around the world. Countries like Venezuela and Guatemala, as well as many others, may soon follow the path that was forged by El Salvador, seeking progressive financial solutions based on blockchain technology to empower citizens and facilitate new epochs of economic growth and independence.

Contrary to the claims of critics correlating El Salvador’s economic woes with Bitcoin adoption, adoption is a response to the intractable challenges that El Salvador and similar countries currently face, not the cause. The government of El Salvador has made a bold and commendable move to give its citizens and, indeed, itself a chance for economic freedom. As citizens gain success with the financial instruments that have been placed in their hands, other countries will follow their ambition to take a step forward in the next generation of finance.

Bryan Hernandez is the president and co-founder of Structure.fi, a DeFi, crypto and traditional market platform recently launched in El Salvador. He is also the founder and CEO of Sonar Trading, a trading company 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 the Massachusetts Institute of Technology and Harvard University, during which he published numerous articles on Nature, Cell and other peer-reviewed journals.

This article is for general information purposes and is not intended and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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