“El Salvador: Why Bitcoin?” by Isaac F.

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 As of September 7th of 2021, The El Salvadoran Government has officially announced bitcoin as a legal tender. This makes it the very first country to do so. This is a big moment for not only bitcoin but cryptocurrency as a whole. It wasn’t too long ago that the idea of cryptocurrency was a joke but here we are now, as bitcoin has officially become a currency of a country.

In 2008, a white paper, an informational document, was written and published by Satoshi Nakamoto, an anonymous individual/group. It outlined the idea of a peer-to-peer electronic cash system that could remove the need for banks to be a part of the transaction process. One year later, in 2009, Bitcoin was officially released, and thus began the rise of cryptocurrency.

Cryptocurrencies are relatively new and there is a massive amount of distrust in the currency’s volatile nature. Cryptocurrencies grew in popularity in 2016 and 2017 but only really took off during 2020 due to the Coronavirus. The price of Bitcoin peaked at around $60,000 this year.

Now with the brief history of cryptocurrency and more specifically, Bitcoin, out of the way we can talk about the subject of the blog. September 7th was an important day in the history of cryptocurrency. It’s the first time that cryptocurrency has officially been recognized as a currency by a world government. Its volatile nature causes many to be wary of it and only a couple of years ago almost no retailers wanted anything to do with it. Cryptocurrency has come a long way from its humble origins as a theoretical replacement for banks and other third parties in the transaction process to now being accepted as an official currency of a nation.

Unfortunately for El Salvador, the experiment got off to a rocky start. There were many protests from mistrustful citizens and more than 1,000 people marched in El Salvador’s capital against the adoption. ‘"This is a currency that's not going to work for pupusa vendors, bus drivers, or shopkeepers," said a San Salvador resident who opposed the adoption of the cryptocurrency. Pupusas are a traditional Salvadoran corn-based food.’ (Reuters “Salvador street protest breaks out against bitcoin adoption” paragraph 3) The problem with the adoption of bitcoin is not only how volatile it is but also the fact that ‘Still, the poorest may struggle to access the technology needed to make bitcoin work in El Salvador, where nearly half the population has no internet access and many more only have spotty connectivity.’ (Reuters “El Salvador's world-first adoption of bitcoin endures bumpy first-day” paragraph 12) There is also speculation that the adoption ‘may fuel illicit transactions and financial instability.’ (Reuters “El Salvador's world-first adoption of bitcoin endures bumpy first-day” paragraph 14)

Before the launch, El Salvador purchased twenty million dollars worth of bitcoin increasing the price of Bitcoin a considerable amount. This caused the price of some other cryptocurrencies to fall. The change also made businesses accept Bitcoin along with their original official currency, the US dollar, though it is not yet clear if businesses will be penalized if they do not. The government also set up ATMs that would convert Bitcoin to dollars using the Chivo wallet. The Chivo wallet, unfortunately, was delayed and the Salvadoran president, Bukele, blamed Apple, Google, and Huawei.

While the adoption of Bitcoin as one of El Salvador’s official currencies is an important moment in the history of cryptocurrencies, there are a number of problems with it. Whether it be the availability of the technology for the citizens of El Salvador or the shady doings of Bukele, there are many questions about the real reason for its establishment. For now, all we can do is watch on and wait for the results.

Works Cited

Renteria, Nelson, and Anthony Esposito. “El Salvador’s World-First Adoption of Bitcoin Endures Bumpy First Day.” Reuters, 8 Sept. 2021, www.reuters.com/business/finance/el-salvador-leads-world-into-cryptocurrency-bitcoin-legal-tender-2021-09-07.

Pineda, Wilfredo. “Salvador Street Protest Breaks out against Bitcoin Adoption.” Reuters, 7 Sept. 2021, www.reuters.com/world/americas/salvador-street-protest-breaks-out-against-bitcoin-adoption-2021-09-07.

NextAdvisor. “What Is Bitcoin?” NextAdvisor with TIME, 12 Aug. 2021, time.com/nextadvisor/investing/cryptocurrency/what-is-bitcoin.


Comments

  1. GillianSeptember 13, 2021 at 11:37 AM

    I think that the rise of cryptocurrencies and the implementation of Bitcoin into El Salvador’s economy is really interesting to see. While it’s interesting to see the implementation of cryptocurrencies on such a large scale, I think that the experiment could have gone much smoother, and I worry that such a setback may hurt an already fragile economy.

    ReplyDelete
  2. AnonymousSeptember 14, 2021 at 8:02 AM

    A country with nearly half of the population unable to access the internet has adopted one of the most volatile forms of currency available, and only accessible through the internet. Who thought this was a good idea?

    ReplyDelete
  3. AnonymousSeptember 14, 2021 at 5:16 PM

    I think that it was risky to base an entire countries currency on something completely electronic. We all know that technology is not always extremely reliable. This past 2 years has proven that fact. I also wonder how people who don't have access to modern technology are supposed to function in a society where the main currency is electronic. What happens when internet is down for an afternoon? I just like it would cause more problem than it would solve. ~ Annie

    ReplyDelete
  4. AnonymousSeptember 15, 2021 at 8:27 AM

    While the new availability of bitcoin might be a good thing, I do not think cryptocurrency as a whole is developed enough to support a lesser developed country like El Salvador. Crypto has no real world value, and a small country like El Salvador would usually need actual resources to support itself. The people there aren't the wealthiest to say the least, so the country already is at a disadvantage of employing a currency that doesn't have actual value. If the country all of a sudden had an influx of natural resources, this might be a different story. The strategy makes sense in my mind, just not for El Salvador. If a large and wealthy country like the US or the UK employed bitcoin as their currency, I would assume that the average citizen could afford a currency. However I could be wrong, perhaps the El Salvador government has an idea that I'm not aware of?
    -Thomas

    ReplyDelete
    Replies
    1. UnknownSeptember 15, 2021 at 8:29 AM

      A currency such as this*
      (Grammar correction)
      -Thomas

      Delete
  5. AnonymousSeptember 16, 2021 at 6:28 AM

    I find it interesting that the first country to try something like this is an undeveloped one with such a small population that can even use bitcoin, it seems like a gamble already but if half of your citizens cant even use the currency I think its just a waste of money.
    -Ben

    ReplyDelete

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