coming! The first country in the world to use Bitcoin as a currency

Can you imagine a country struggling at the poverty line will be led by the government and set off a wave of bitcoin payments?

Tomorrow, you may work and move bricks just like today, watching Ai Fan'er push three links with one click. Tomorrow's El Salvador, a Central American developing country with a population of only 6.5 million, is about to usher in "great changes."

Starting from September 7, Bitcoin will become the legal tender of El Salvador along with the U.S. dollar. This place, which you have never heard of several times in your life, will become the first country in the world to adopt Bitcoin as its legal currency.

El Salvador: Come use Bitcoin, it's "cool"!

On August 30, the Salvadoran government released a one-minute official promotional video.

The promotional video pointed out that the use of Bitcoin is not mandatory, and people can freely choose to use USD or Bitcoin when paying. And cash transactions, commodity pricing, wages and pensions, etc., will continue to use U.S. dollars.

You can use the official e-wallet app "Chivo"-locally, this word means "cool". The government of El Salvador will issue $30 worth of Bitcoin to each user's e-wallet as a small gift to encourage consumption. Of course, other payment apps will also add bitcoin payment options.

In addition, the Salvadoran government has set up a US$150 million trust fund to support the exchange of bitcoins to the US dollar. It is also deploying 200 bitcoin ATMs across the country, where people can convert bitcoins into US dollars and then withdraw cash.

You don’t need to pay for cash to find a credit card, you can pay if you have a mobile phone, and you can make cross-border transfers at any time. The handling fee is all 0…These are the official propaganda of the "cool" of Bitcoin payment. The President of El Salvador, Nayib Bukele, believes that Bitcoin will bring a brighter and richer future to the country.

▲ President Bukele of El Salvador introduced the official electronic wallet Chivo

You may be curious, why did this bold experiment land in El Salvador in the first place?

In addition to President Bukele himself as an avid supporter of cryptocurrency, there is another important fact: As one of the poorest countries in Central America, El Salvador's annual GDP accounts for about 20% of cross-border transfers and remittances.

The Wall Street Journal reported that one quarter of Salvadorans currently live abroad (mainly the United States), and they will send the money earned from part-time work back home to their families. According to data from the El Salvador Central Bank, the total remittances of diasporas in 2020 reached US$5.9 billion.

▲ During the epidemic, the high unemployment rate in the United States can directly affect El Salvador through cross-border remittances. An 89-year-old grandmother was unable to send money to her home because her grandson was unemployed in the United States. She had to rely on charity assistance to feed herself.

The handling fee for cross-border remittances can be as high as 10% or more per transaction; if you use Bitcoin to transfer money, this wasteful handling fee can skip overseas middlemen and save money. Bukele pointed out that for El Salvador, this is not a small amount of income.

In addition, the Salvadoran government also hopes to use this new policy to attract foreign investment. The relevant bill passed in June stated that bitcoin transactions can be exempt from capital gains tax (generally buying and selling stocks, bonds, real estate, precious metals, etc.), and foreigners can obtain residency rights as long as they invest 3 bitcoins or more-to put it bluntly , Is hoping to boost the economy.

Is it really playing with fire to use Bitcoin to make money?

According to the "Guardian" report , before this national "big gambling experiment", El Zonte, a surfing town with a population of only 3,000 in El Salvador, had begun a small-scale, unofficial Bitcoin experiment.

In 2018, some cryptocurrency supporters from California, USA, initiated a project called "Bitcoin Beach" here. They sent $50 worth of Bitcoin to every family in the town to encourage local businesses to use it.

At that time, this may be the first close contact between El Zonte and electronic payment. But now, buying things with bitcoin is quite common in the local area. Even if you encounter a simple scones stand, the proprietress can skillfully tell you "scan here and pay bitcoin." According to project data, approximately 90% of households in the town have conducted encrypted transactions to pay for groceries, utilities, and healthcare.

It seems to be a promising example, but it is not that simple to turn Bitcoin from a "game" for a few people into a national legal tender.

Since the passage of the relevant bill in June, demonstrators have continuously taken to the streets of the Salvadoran capital to protest and express their concerns about Bitcoin. Local banks even received a large number of calls, saying that they would immediately withdraw their deposits to avoid exposing their assets to the high-risk Bitcoin market.

According to a survey recently released by the University of Central America (UCA) , about 70% of respondents disagree or strongly oppose Bitcoin becoming legal tender, and believe that this law should be repealed. In addition, the survey also found that more than 90% of Salvadorans did not know Bitcoin as a cryptocurrency-20.6% of the respondents did not know what Bitcoin was, and 70% said they didn't know much about it.

This policy, which affects the whole country, took only 5 days from the proposal to the adoption.

Salvadoran economist Ricardo Castañeda pointed out, “This law was passed quickly without technical research or public debate. I think the president did not fully understand the meaning of the law, and it may cause serious macroeconomic problems.”

The International Monetary Fund (IMF) has reminded countries not to use encrypted assets as legal tender, believing that the risks and costs outweigh the potential benefits, because the value of privately issued tokens may be very unstable-for example, Bitcoin reached $65,000 in April It peaked, but dropped by as much as two months later. Such violent fluctuations will greatly weaken the government's ability to maintain economic and currency stability, and even bring turbulence and chaos to the country.

▲ Playing is the heartbeat

Carlos Acevedo, former governor of the Central Bank of El Salvador, stated:

Using Bitcoin to determine currency is like a roller coaster ride for all of us.

Colombian economist Daniel Munevar also feels uneasy about this, thinking that El Salvador puts itself and the IMF at risk :

This is essentially gambling with the Salvadoran government and IMF money. It is one thing to bet on cryptocurrencies in order to obtain huge returns, but the current situation is that personal investment of let go is raised to the national level.

Another worrying issue is that Bitcoin's decentralization and anonymity may open the door to criminal transactions and turn El Salvador into a "safe haven" for corrupt money laundering.

At present, 70% of El Salvador's population does not have a bank account. Some supporters believe that the new policy gives these people the opportunity to use digital payments and even participate in global finance. But this also brings a huge hidden danger-they have hardly received financial-related education, if they only see the "cool" of Bitcoin in their eyes, but lack understanding of the high risks and operating mechanisms behind it, the consequences will be It may be unimaginable.

In August, the Central Bank of El Salvador issued two documents related to Bitcoin , stating that any financial institution that wants to set foot in this field must be subject to strict supervision. For example, relevant agencies need to comply with anti-money laundering laws, verify user identity (KYC rules, know-your-customer), monitor electronic transactions and report suspicious operations in a timely manner. In addition, users need to be exposed to bitcoin risks. Wait for reminders and warnings.

Are these regulatory measures feasible? It remains to be seen.

The future of digital currency: Central bank entry, multi-currency coexistence?

Today, Bitcoin as a payment method is being accepted by more and more application scenarios.

Visa, Mastercard, Paypal, etc. have all stated that they will allow users to use cryptocurrency for transaction settlement; Microsoft was a player that ended as early as 2014; in March this year, Musk said that Tesla could be bought with Bitcoin (although later It was stopped due to environmental considerations), which once made Bitcoin usher in a skyrocket.

After the passage of the Bitcoin bill in El Salvador, politicians from Argentina, Paraguay, Brazil and Panama have expressed their support on social networks. The Cuban government also recently announced the recognition of Bitcoin and said it plans to regulate digital assets. Some underdeveloped regions in Africa and Latin America are vying to give cryptocurrencies the most enthusiastic embrace.

In addition to focusing on existing cryptocurrencies, reports indicate that 86% of national central banks are currently actively studying and considering the feasibility of issuing central bank digital currencies (CBDC). This matter has become an imperative "outreach."

Why do central banks want to issue their own digital currencies?

First of all, the emergence of digital currencies such as Bitcoin may have an impact on the country's financial system; CBDC is the digital version of the country's legal tender, which can safeguard the country's currency issuance rights.

Secondly, the application of digital currency can improve payment efficiency in daily life; it can reduce settlement costs in cross-border transactions and also help promote the internationalization of domestic legal currency.

Furthermore, the design of the central bank's digital currency can be controllable. Compared with Bitcoin, CBDC can monitor and track illegal activities such as money laundering under the premise of ensuring user privacy; at the same time, the government can quickly observe the country's economic conditions from the flow of digital currency, and promptly intervene with monetary policy.

The "digital renminbi", which China is currently deploying pilot projects, is regarded as a mature pioneer in this exploration.

▲ Picture from SCMP

Ai Faner has previously introduced that the functions and properties of "digital RMB" are exactly the same as banknotes, except that its form is digital, and there is no need to bind any bank accounts and payment accounts. It is mainly used to replace M0 currency ( Cash in circulation, namely banknotes and coins). It combines the advantages of cash and mobile payment, which not only guarantees the convenience of mobile payment, but also retains the legal reimbursement, anonymity and dual offline payment of cash.

Related Reading

"Digital RMB" is coming. How is it different from Alipay and WeChat? 》

"The digital renminbi is finally available, how is the experience? 》

Previously, Europe and the United States maintained a cautious and wait-and-see attitude towards digital currencies, and Facebook has been frequently blocked from issuing Libra, but their attitude has undergone a 180-degree change in the past two years.

In May of this year, the Digital Dollar Project in the United States announced that it will launch a pilot project in the next 12 months to test the potential use of the U.S. central bank's digital currency.

▲ Libra, the once ambitious cryptocurrency, has been renamed Diem after several adjustments and is expected to be launched in 2022

Some analysts predict that in the future, cryptocurrencies such as Bitcoin are likely to coexist with legal tenders, and will be used in limited private sectors, and continue to receive attention as a means of investment and speculation.

However, the radical approach to making Bitcoin a legal currency (or even replacing legal currency) like El Salvador is unlikely to become mainstream.

#Welcome to follow Aifaner's official WeChat account: Aifaner (WeChat ID: ifanr), more exciting content will be provided to you as soon as possible.

Ai Faner | Original link · View comments · Sina Weibo