President of the country promised to make bitcoin the national currency

Experts told whether other states will follow the example of El Salvador

President of the State of El Salvador in Central America Nayib Bukele decided to make bitcoin the national currency. This will happen if the proposal is approved by the country’s parliament. El Salvador does not have its own currency and uses the US dollar for settlements. The country’s economy is in a deplorable state and is supported by remittances from citizens working abroad. The introduction of bitcoin will save on commissions and speed up transfers. If the president carries out his plans to the end, other countries with similar economies could follow the example of El Salvador. What this will lead to – assessed by the experts.

There are 6.4 million people living in El Salvador. 70% of them do not have a bank account, they work in the shadow economy. About 2 million citizens live abroad and transfer more than $ 4 billion home a year. This money makes up 20% of the country’s GDP. At the same time, banks charge a commission for transfers, the transfers themselves take several days and many people receive them in cash. The introduction of bitcoin will revive the country’s economy, provide citizens with access to loans, savings, investments and reliable transactions, Bukele explained. However, the president did not say exactly how the cryptocurrency will be integrated into the country’s financial system and what infrastructure will be needed for this.

In general, the use of cryptocurrency as a national means of payment is not nonsense. Other countries are testing and even already using digital money as government money. However, all of these examples are about national cryptocurrencies, not bitcoin. In particular, the Venezuelan government recently announced social security payments in its own petro cryptocurrency, which is tied to the value of oil, gold, iron and diamonds. National digital currencies are being tested in Sweden, South Korea, Indonesia.

To make bitcoin the national currency, it is necessary to reform the financial system on a large scale, experts warn. “It is necessary to transfer all payments, the entire money turnover within the country to bitcoin – lending to commercial banks, lending to state-owned companies, calculating the state budget, collecting taxes: everything is in bitcoins. Now El Salvador has no way to completely switch to bitcoins. Perhaps President Bukele wanted to draw global attention to the country, to show digital companies the readiness of the Salvadoran authorities to provide certain preferences, ”says Vladimir Moshkin, founder of the ROY club crypto community.

The question also arises: with whom will El Salvador conduct mutual settlements in bitcoins? “The answer is obvious. With countries that, for some reason, are unable to conduct transactions in US dollars and through the SWIFT international bank payment system. We are talking about states in conflict with the United States – Venezuela, and Iran, partly Russia, China, ”our interlocutor notes.

With all the advantages of bitcoin (independence, cross-border), its main drawback is the volatility of the exchange rate, which is constantly jumping. Only this year, its rate soared to 70 thousand per “coin” and then fell by more than two times. And the transaction fees are higher here than other cryptocurrencies. However, the popularity of bitcoin is growing. “There is a lot of talk about how long the American currency will maintain its leading position in the global economy. Rumors about the possible widespread use of bitcoin are forcing investors to pay more and more attention to cryptocurrency, to see in it not only a way to actively increase, but also to preserve their savings, “said Anastasia Kosheleva, head of Investing.com in Russia.

According to experts, the adoption of bitcoin as a tool for cross-border payments at the level of states, even such as El Salvador, will only raise its rate.

Published in the newspaper “Moskovsky Komsomolets” No. 28554 dated June 8, 2021

Newspaper headline:
Bitcoin went around the world

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