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Bitcoin: This country officially introduces cryptocurrency

Mexico City. At the end of August, it was probably also clear to the last Salvadoran how serious President Nayib Bukele is with the plan to implement Bitcoin as a legal currency. In whole El Salvador The government had 200 ATMs set up at which the US dollar can be exchanged for the crypto currency from September 7th.

Then the population at gas stations and in supermarkets with Bitcoin counting. Taxes should also be able to be paid in this way. Parliament passed a US $ 150 million state trust fund to hedge currency risk.

As the first state, the small Central American El Salvador is taking it seriously and evaluating Bitcoin as the official one currency and thus to legal tender. Central bankers, financial jugglers, scientists and governments around the world are looking at this pilot project with great interest.

Experts: Introducing Bitcoin as currency is “crazy idea”

Let it be a “experiment out of this world, ”says Dante Mossi, President of the Central American Bank for Economic Integration (CABEI). The International Monetary Fund describes the project as “financially and regulatory” too risky and refused El Salvador support for the introduction of Bitcoin.

And the development economist and Central America expert Christian Ambrosius considers the project to be a “crazy idea“With dubious motives and an unknown outcome.

The new ATMs are called “Chivo cajeros“After the name of the government-supported wallet (Chivo = goat) in which the Bitcoin will be stored in the future. The wallet allows private individuals and companies all over the world to make payments in Bitcoin or dollars.

El Salvador: Bitcoin Welcome Bonus of $ 30

Whoever downloads Chivo gets a bonus Free $ 30. The head of state wants to make the change palatable to the 6.5 million inhabitants. But that only works to a limited extent. No sooner had the ATMs been installed in the state of Hesse’s greetings than the first protesters took to the streets.

Hundreds of workers and retirees demonstrated against the crypto plans in the capital, San Salvador. “Bukele, we don’t want Bitcoin” and “No to money laundering” were written on the banners. Pensioners in particular fear that they will only receive their pensions in the future Cryptocurrency be paid out.

Hipster President Bukele wants to cut transfer costs

At the beginning of June it had from Nayib Bukele controlled parliament passed the two-page “Bitcoin Law” in a fast-track process. The 40-year-old autocrat, who gives himself a hipster image with leather jackets, the wrong way round baseball caps and his Twitter diplomacy, justifies the crypto implementation by saying that the high costs for the transfers of the Salvadorans living abroad are eliminated or would decrease.

Around a third of the Salvadoran population lives far from home, just over two million of them in the United States. “Our people pay $ 400 million a year in transfer fees. These savings alone will be a great advantage, ”said Bukele on the short message service Twitter. the Abroad Salvadorans transferred nearly six billion dollars to their families back home last year. About 20 percent of El Salvador’s gross domestic product comes from these cash transfers.

Many Salvadorans do not have a bank account

Another argument: Less than half the population has a bank account. “Everyone is watching how Bitcoin works in El Salvador and whether the costs for money transfers are falling sharply,” emphasizes CABEI boss Mossi, whose experts advised the government on Bitcoin implementation. Because El Salvador could Idol for those countries of Central America that have a similar economic structure.

No sooner was the crypto law in the world than criticism rained down. A country that has been “trapped in a crazy monetary system (dollarization)” since 2001 is moving towards an even crazier system. “It’s hard to find a reason why this might turn out well,” summed up Dani Rodrik, An economist at Harvard University, was one of the first to raise his concerns.

President of El Salvador wants to attract investors

Also an economist Christian Ambrosius, Professor at the Latin America Institute of the Free University of Berlin, is skeptical and asks for whom the Bitcoin introduction should bring advantages: “It was a head-over-heel decision by Bukele, which was made with little preparation and little transparency”. It looks as if the authoritarian ruling president had more the attention of global investors and the crypto community in mind than the well-being of his own people.

The president flirts openly with that Market capitalization of Bitcoin, which is currently around 901.5 billion dollars, and hopes that perhaps a few percent of that will be invested in his country in the future.

“Investors are actually excited and see the opportunity to acquire a speculative currency To be able to transform them into real goods, ”says Ambrosius in an interview. But contrary to what the government argues, Bitcoin does not create “financial inclusion”. This would require opportunities for asset accumulation, protection against financial risks and access to cheap loans and insurance. This is not possible with a means of payment like Bitcoin.

El Salvador does not want to work with corruption investigators

Ambrosius suspects that Bukele wants to occupy a niche in the global financial sector with the Bitcoin economy, similar to it Panama with its banks and tax models does. With all the dangers that this brings with it, especially that of “becoming a point of contact for money laundering and black market activities,” emphasizes Ambrosius. Crypto emerged from the idea of ​​withdrawing financial transactions from the state and its regulation.

In this context, it is noticeable that El Salvador is working with the corruption investigators of the International Commission against Impunity canceled in El Salvador (CICIES).

Protests against Bitcoin are getting stronger

It is still unclear whether the cryptocurrency will be mandatory for all Salvadorans, as the law prescribes. Clause seven actually states that the cryptocurrency of “everyone Economic operator“Must be accepted.

But on the home stretch, Bukele moved away from it again. “If someone absolutely Cash wants to carry with him, does not want a welcome bonus and wants to continue to pay commissions for the transfers, he can continue to do so, ”wrote Bukele somewhat huffedly on Twitter, his preferred means of communication.

But the closer September 7th approaches, the more frequent the protests became. The tenor has always been that the use of Bitcoin is not in the interests of the population. Less than a week before the deadline, hundreds expressed their opinion Protesters the fear that the volatile value of Bitcoin could destroy people’s often scarce savings and incomes. “We know that this cryptocurrency varies dramatically in value,” said unionist Stanley Quinteros. “It changes from one second to the other and we have no control over it.”

Bitcoin fluctuates greatly in value

Parts of the Salvadoran economy see it that way too. Of the “Association of International Freight Companies“(ASTIC) wants to protect itself against ups and downs with Bitcoin payments with a fee of 20 percent.

The fears are justified. This year a Bitcoin fluctuated between 24,111 euros in January and almost 50,000 euros in April. At the beginning of September the value was 40,800 euros. “With such a fluctuation, the dangers of Business failures and Personal bankruptcies“, Says in an interview Pavel Vidal, Cuban economist at Javeriana University in Cali, Colombia, who dealt with the introduction of the cryptocurrency in Cuba. In a country where a third of the population live in poverty, this harbors great social explosives.

Hasan Sheikh
Hasan, who loves technology and games, is studying Computer Engineering at Delhi JNU. He has been writing technology news since 2016.


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