The first of many or just once?

On September 7th, the tiny Central American nation of El Salvador introduced Bitcoin as legal tender for the first time in history.

The true meaning of this day in the way people around the world share values ​​and the meaning they apply to the concept of money will take quite a while to fully revise and understand. But it is already clear that September 2021 will go down in the history books of financial digitization there alongside January 2009.

Surrounded by controversies, protests, bumpy infrastructure – how else? – but also to the joy and optimism of millions of people around the world who look with hope at this great experiment, Bitcoin Day marks the first instance of a sovereign nation converting decentralized digital assets into their local currency. Did it work out in the end?

politics

As a country with fewer than 7 million inhabitants, El Salvador has long denied its claim to monetary sovereignty. In 2001, the colón, the national currency in use for more than a century, was abolished in favor of the US dollar. The move has many practical implications, as remittances – much of which are from US-based Salvadorans – exceeded 16% of the country’s gross domestic product at the time.

At that time, then-President Francisco Flores Pérez’s move sparked protests and was condemned by critics who found it undemocratic and beneficial to bankers and the rich.

Two decades later, President Nayib Bukele – a 40-year-old who took over the helm of a party called New Ideas – added another chapter to the monetary history of El Salvador – this time adding another chapter to a foreign currency circulating in the country. one without borders.

As was the case 20 years ago, there has been a backlash regarding the Bitcoin law. However, the same surveys showing a lack of support for Bitcoin (BTC) as a new means of payment suggest that a large segment of Salvadorans have a limited understanding of what it is and how it will affect their lives.

In addition, resentment towards Bitcoin can in many cases be linked to resentment towards Bukele, who, despite his strong approval ratings, remains a divisive figure who tends to specialize. The alleged rights concern some international observers.

To sum up, there are good reasons to believe that there is no strong ideological opposition to the concept of decentralized funding in El Salvador and that any obstacle currently in place is likely to destroy it and be an eventual success.

Busy on the floor

As expected, the somewhat hasty start of the payment infrastructure did not go smoothly. The government-operated Chivo wallet was out of order for a few hours and some retail workers reportedly had no idea how to process BTC payments. Immediately after the introduction, the President himself took on the role of customer support, tweets Update on the status of the wallet service.

Overall, however, according to those who were there to see El Salvador take its first steps as a Bitcoin nation, things are going smoothly right after a difficult start. Bart Mol, founder and chairman Radio Satoshi Audio files, tweeted on his way from inactive Chivo ATMs to successful Lightning transactions to paying for pizza and coffee at separate retail locations.

The general feeling, Mol concludes, is “witnessing history”.

International response

The institutions of the global financial system seem less enthusiastic. The International Monetary Fund has been very active on El Salvador’s Bitcoin law since it was passed earlier this summer. If this process produces positive results, maybe the IMF and other global financial institutions will come?

Some legal experts are skeptical of this prospect. During a Discord “Ask Me Everything” (AMA) session with Cointelegraph Markets Pro subscribers last week, Cointelegraph General Counsel Zachary Kelman emphasized that Bitcoin is difficult for global financial institutions to use as their national currency:

“The reasons given (environment, transparency) against the introduction of BTC by El Salvador are not the real reason, but the threat that cryptocurrencies pose to the global political order and the banking system was established. So I don’t think these international organizations will largely support Bitcoin. “

However, other countries are watching closely. Yes, El Salvador’s leadership role in remittances combined with previous experience in outsourcing the local currency function to foreign currencies is a rare combination. Most other countries have higher release thresholds, even if they can muster the political momentum to establish decentralized money as legal tender.

However, the potential positive effects of moving from El Salvador could lead other countries to take Bitcoin more seriously as a payment infrastructure. Amanda Wick, chief legal officer of blockchain analytics firm Chainalysis, told Cointelegraph that cryptocurrency is an ideal technology for money transfers and is therefore well positioned to serve economies that are high in consumption.

“Lots of citizens [in El Salvador] lack of access to traditional financial services, which can promote financial inclusion. These drivers can shed light on which countries might follow suit. In our research, we found that these are common use cases, especially in countries in Latin America, Africa, and Southeast Asia. “

Reported acceleration of central banks’ digital currency research programs of other countries, efforts to determine the legal status of cryptocurrencies in Ukraine, and discussions to make cryptocurrency death a legal alternative payment method in Panama, all of which can be seen as knocking . because of the brave initiative of El Salvador.

Related: Slow Start: Crypto regulators are lagging behind the blockchain industry

Of course, not every state can accept Bitcoin as its national currency, but almost everyone was asked on September 7th to reassess their place on the money card.

Regardless of the outcome of the El Salvador experiment, the groundbreaking example of the Central American nation has pushed cryptocurrencies deeper into the mainstream political agenda than ever before unless they are adopted by a sovereign nation.