Should bitcoin be used as currency?
On Tuesday, September 7th, El Salvador announced that the country will be recognising Bitcoin as an official currency. El Salvador is known to have $26 million in bitcoin.
President Bukele came to this decision so that 70% of Salvadors who don't have access to 'traditional financial services can take advantage of bitcoin and use it to their convenience. Bukele also argues that this decision was important to make advancement in the world and keep up with times, as quoted, Bekele said, " El Salvador has the right to advance toward the first world". This decision will also make it easier for El Salvador nationals who live abroad, to easily transfer money for their families.
While Bukele was able to support his decision for these reasons there was some backlash. Civilians were not too excited about it. Jesuit college posted poll results showing that 67.9% of the population disagreed with the governments' decisions. Many people reported that they did not know enough about bitcoin and did not know how to use it. The US embassy in El Salvador disagreed with this government's decision and said it "undermines democracy."
Bitcoin is valued higher with each passing day. Hence, using it as currency can cause spending surges which will result in a fluctuating and unpredictable economy. Keeping that in mind, is El Salvador keeping up with the times or causing an economic tragedy?
7 comments:
In my opinion El Salvador's decision will only be justified once the rest of the world follows. If no other nation takes up the same stance as El Salvador then the idea that this is "keeping up with the times" does not really apply.
We will just have to see how the world responds to this.
The decision to recognize Bitcoin in this capacity is the first of its kind but will not be the last. Many smaller countries like El Salvador are also considering taking this leap of faith.
But managing this new currency will prove to be difficult. This acceptance can bring more business to the country by inviting cryptocurrency miners to the region to setup mining centers. If water for cooling computers and electricity for operations is cheap, this can potentially raise the standard of living from taxes coming in and high tech jobs. However, there needs to be strong policies to regulate these businesses to prevent exploitation and corruption.
I feel that due to the pandemic many countries will follow in the steps of El Salvador. It is extremely risky as any day Bitcoin could just plummet for any number of reasons, but with that being said it also is growing every day and could start a vast amount of economic growth through El Salvadorian businesses. This could also have a big impact on their international trade and connecting with other countries more efficiently once other countries follow what El Salvador is doing.
I think this is definitely an advancement for El Salvador. On an internal level, this may be good due to the large amount of money the country has in Bitcoin, the rapidly increasing value of Bitcoin, and the possible remittances that can come in from those living abroad.
However, Bitcoin is unpredictable and can fall any day. As Madeline also mentioned, this may not work unless other countries follow suit- which can be either likely or unlikely. Many developing countries don't actually specialize in Bitcoin at all, and others may consider it too risky.
I like the decision as I see crypto being the future, but with that being said this decision is undoubtedly premature. Bitcoin and crypto as a whole is not ready to be a currency and continuously is improving and stabilizing. I liked how you mentioned the part where families facing distance can easier transfer money, but again, I believe it is too soon to adopt Bitcoin as a currency.
As we discussed in class, bitcoin is a unstable form of currency because its value is constantly fluctuating significantly. However, we must keep in mind that a decade ago people never expected humans to have the ability to pay for things with their phones or with a literal tap of a card on a card reader. We can now transfer money from one person to another with a click of a button and a decade ago we were still trying to understand the internet. I think the adoption of bitcoin as currency is premature, but it would not surprise me if in the future it becomes a competitor of the dollar.
While El Salvador takes a huge risk, it might be fruitful if the rest of the world follows. I believe it will be a little difficult in the coming times because of the lack of knowledge about bitcoin in many countries. Even in developed countries, so many people remain unaware of how bitcoin works and what advantages/disadvantages it might have. Only time will tell if their decision is actually beneficial or not.
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