The first in a series or unique?

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On September 7, in a historic first, the small Central American nation of El Salvador adopted Bitcoin as legal tender.

The true significance of this day for the way people around the world trade value and the meaning they ascribe to the concept of money will take some time to be reified and fully understood. Yet what is already clear is that September 2021 will be next to January 2009 in the history books of the digitization of finance.

Surrounded by controversies, protests, bumpy infrastructure deployment, how can we do otherwise? but also the joy and optimism of millions of people around the world who view this great experience with hope, Bitcoin Day marked the first example of a sovereign state making a decentralized digital asset its national currency. Was it successful, after all?

Politics in the background

A country of less than 7 million inhabitants, El Salvador has long since renounced its claim to monetary sovereignty. In 2001, it abandoned the coln, its national currency used for over a century, in favor of the United States dollar. The move made a lot of practical sense as the share of remittances from a good chunk of them from US-based Salvadorans in the country’s gross domestic product exceeded 16% at peak points.

At that time, the decision of then-President Francisco Flores Prez sparked protests and was condemned by critics who said it was undemocratic and would have benefited bankers and the wealthy.

Two decades later, President Nayib Bukele, a 40-year-old who came to power at the head of a party called New Ideas, this time added another chapter to El Salvador’s monetary saga, supplementing a foreign currency circulating in the country with another without borders. .

Just like 20 years ago, there has been a backlash regarding the Bitcoin Law. However, the same polls that show a lack of support for Bitcoin (BTC) as a new payment method suggest that a large portion of Salvadorans have a limited understanding of what it is and how it will affect their lives.

Additionally, in many cases resentment towards Bitcoin can be linked to resentment towards Bukele, who despite strong approval ratings remains a divisive figure whose alleged autocratic tendencies worry some international observers.

In summary, there is good reason to believe that there is no strong ideological opposition to the concept of decentralized finance in El Salvador, and any currently existing setbacks will likely dissipate further down the adoption curve if the implementation turns out to be a final success.

Hustle and bustle on the ground

Meanwhile, the somewhat rushed launch of the payments infrastructure was, as you might expect, far from transparent. The government-run Chivo wallet went down for several hours and some retail workers apparently didn’t know how to process BTC payments. Shortly after launch, the president himself took on the role of customer support, tweeting updates on the state of the wallet service.

Yet overall, according to accounts from those who were there to watch El Salvador take its first steps as a Bitcoin nation, things started to calm down shortly after a choppy start. Bart Mol, founder and host of the Satoshi Radio podcast, tweeted along his journey from the failed Chivo ATMs to successfully complete Lightning transactions to pay for pizza and coffee at separate outlets.

The general feeling, Mol concluded, was that of witnessing history.

International response

The institutions of the global financial system seem less enthusiastic. The International Monetary Fund has been passive-aggressive on Salvadoran Bitcoin law since it was passed in early summer. Maybe if this experience works well, the IMF and other global financial organizations will find their way there?

Some legal professionals are skeptical of this prospect. During a Discord ask me any (AMA) session with Cointelegraph Markets Pro subscribers last week, Cointelegraph General Counsel Zachary Kelman said global financial institutions are unlikely to embrace Bitcoin as national currency:

The reasons given (environment, transparency) for opposing the adoption of BTC by El Salvador are not the real reasons, namely the threat that crypto poses to the global political order and the established banking system. So, I don’t think these international bodies would ever broadly support Bitcoin.

Other nation states, however, are watching closely. Certainly, El Salvador’s position as the region’s leader in remittances, combined with its previous experience in outsourcing the domestic monetary function to a foreign currency, is a rare combination. Most other countries have higher bars to cross even if they could muster political momentum to make decentralized legal tender.

Nonetheless, the potential favorable effects of El Salvador’s decision could prompt other countries to take Bitcoin more seriously as a payment infrastructure. Amanda Wick, chief legal officer at blockchain analytics firm Chainalysis, told Cointelegraph that cryptocurrency is an ideal technology for remittances, and therefore is well positioned to serve economies. heavy in remittances:

Many citizens [in El Salvador] do not have access to traditional financial services, which could stimulate financial inclusion. These determining factors can provide insight into which countries might follow suit. We found in our research that these are already popular use cases in countries in Latin America, Africa, and Southeast Asia, in particular.

The reported acceleration of digital currency research programs of central banks in other countries, the drive to define the legal status of cryptos in Ukraine, and discussions to make cryptocurrency a legal alternative payment method in Panama can all be seen as carry-over effects of El Salvador’s bold initiative.

Related: Slow Start: Crypto Regulators Are Lagging The Blockchain Industry

Obviously, not all nation states are in a position to adopt Bitcoin as their national currency. But on September 7, virtually everyone was asked to reassess their position on the digital currency map of the world.

Whatever the outcome of El Salvador’s experience, the pioneering example of the Central American nation has already pushed cryptocurrency deeper into the mainstream political agenda than it could ever get without. recognition of a sovereign state.

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