El Salvador: Uncertain Bitcoin Revolution

This week, the attention of the German-speaking media turned to El Salvador, the first country in the world to circulate bitcoin as legal tender. He stressed that while some applauded, others heralded a breakdown.

Die Welt from Berlin pointed out. “Great transitions can start small. Bitcoin proponents refer to that historical experience. On Tuesday (09.07.2021) El Salvador became the first country in the world to offer fiat money for cryptocurrencies. Bitcoin proponents hope success soon happen. El Salvador will open the floodgates for digital currency. They believe that in the future, many other countries will follow suit. On the other hand, skeptics predict that this currency experiment with some 6.5 million Salvadorans will soon show that Bitcoin cannot be used as a form of payment in everyday life (…) Bitcoin’s first day as fiat didn’t fully convince investors. It gave way on Tuesday after Bitcoin’s price surge in previous days. By the afternoon, Bitcoin was trading at just $46,000. Eve, at $50,000. Traditional financial institutions are also skeptical. Moody’s downgraded El Salvador after Bitcoin law was approved.”

​Revolution or destruction
The Munich-based newspaper Süddeutsche Zeitung said digital currency proponents, financial experts and politicians from around the world had their eyes on the small Central American country, asking: “What will this crypto experiment bring? Revolution or destruction? Is this the beginning? A new era or just a distraction tactic by a president acting in an increasingly authoritarian fashion? It’s only been three years since Nayib Bukele publicly announced plans to convert bitcoin into his country’s official currency Months.(…) Shortly after the announcement, complaints rose. Experts say that cryptocurrency transactions are not necessarily cheaper than traditional remittances. Furthermore, there are good reasons to worry that Bitcoin will not only attract investors to the country, but also criminals and El Salvador has become a money laundering haven.”

dangerous experiment
On top of German business daily Handelsblatt, pensioners are concerned that their pensions will only be paid in cryptocurrency in the future. A crash like the one at the end of 2017 would jeopardize their livelihoods. (…) It’s clear in retrospect: those who bought Bitcoin for 10 cents at the end of 2010 had a crypto wealth of around $20,000 in December 2017. Then the market crashed, and a few months later, Bitcoin fell to around $3,000. Critics therefore argue that the high volatility of cryptocurrencies is precisely what will cause residents of developing countries to lose their livelihoods.

Advantages and dangers
​The Swiss newspaper Neue Zürcher Zeitung in one of the world’s poorest countries like El Salvador, has problems with the use of bitcoin. If cryptocurrencies sometimes lose 70% of their value, as has happened this year, this is an inconvenience for speculators or savers. But for the people of El Salvador, who live on an average of about $4,000 a year, it could be a decision to survive or starve.”

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