El Salvador President Nayib Bukele has yet again made his love for Bitcoin public. In a tweet, Bukele boldly announced that the days of fiat money may soon be over and that Bitcoin is the “real revolution” the world is seeing at present. Bukele also mentioned that El Salvador is spearheading this Bitcoin era.
Taking to Twitter, the El Salvador President stated on Friday that the “Bitcoin Experiment” has only seen the world adopt the cryptocurrency for good. He mentioned that it remains to be seen what impact the adoption of Bitcoin can create on a country’s economy. If it turns out well, the days of fiat money may be over soon, he predicted.
By directing his comments at fiat currency in general, Bukele has raised a question on the future of the existing physical currencies around the world. Since Bitcoin is all digital and decentralised, it has the power to reach a scale of adoption far beyond what we have seen with any other currency. All it has to do for this is prove itself to be better than fiat for a country’s economy.
Of course, this is all a far-fetched idea for most of us right now. Not for Bukele though, who has made sure that Bitcoin gets the status of a legal currency in his country. He envisions it as a way to boost the pandemic-hit economy of El Salvador. More effectively, he sees it as a solution to cut down on about $400 million in fees that is levied by banks and financial institutions on the money sent to El Salvador by expats.
When it legalised Bitcoin in September, El Salvador bought a total of 400 Bitcoins, with the promise of buying more. It has seen its promise through, with its treasury holding well over 1,000 bitcoins now. To increase its adoption, El Salvador also installed over 200 Bitcoin teller machines across the country and promised incentives for citizens who adopts the cryptocurrency.
El Salvador will be a case study soon
Just as the country’s president is bullish on Bitcoin, international organisations have been wary of it. Since legalising Bitcoin, El Salvador has received several warnings from experts cautioning the country to drop its endeavour. The obvious reasoning – Bitcoin is too volatile to be a national currency.
The list of critics includes agencies like the International Monetary Fund, which recently condemned El Salvador’s move to adopt Bitcoin as legal tender. The IMF stated that the move posed significant risks to “consumer protection, financial integrity and financial stability.”
Even El Salvadorians protested the decision back when it was passed. Thousands of citizens of the country marched in El Salvador’s capital in protest, setting off fireworks in front of the Supreme Court building. Heavily militarized police were then deployed at the site of the protest.
Despite the criticism, Bukele is extremely optimistic for Bitcoin, and for now, things seem to be going his way. Since officially adopting it, El Salvador has regularly bought Bitcoin for its treasury, usually when its price dips. With the subsequent increase in Bitcoin price, the country has been able to make substantial gains on its original investment.
From this profit, El Salvador has announced its plans to build 20 ‘Bitcoin Schools’ and conduct other such projects. Though the mega plan of Bukele is to construct the world’s first “Bitcoin city,” which will be funded by Bitcoin-backed bonds. The city has been planned in the eastern region of La Union and will be powered by geothermal energy from a volcano. With this, the city would not levy any taxes as well, except for value-added tax (VAT).