Seeking a Piece of the Pie or The Great Experiment

Written by
Trevor Koverko
Published on
December 6, 2021

Nations are observing an exodus from traditional banking. Some are cautioning the populace, encouraging them to be careful of investments in cryptocurrencies. Many countries are starting to see the writing on the wall – the benefits of cryptocurrencies and what they can mean. So, just while some leading nations are urging caution, they are also forming their own cryptocurrencies.

It is an unfolding chess match between the powers that be and the disruptive and inclusive world of cryptocurrencies, which some theorize was created as a response to the Great Recession that started in 2008. Cryptocurrencies were initially created to facilitate the peer-to-peer exchange of funds all while involving no central banks, no states, and no institutions.

Just as El Salvador launched what many are calling a great experiment by adoption of crypto as legal tender, leaders of other developing nations are laser-focused on if the experiment will be successful. As HEC Professor in Finance Bruno Biais noted in late September, while bitcoin is in some ways a means of payment, it has not often been used as such. El Salvador is shifting that paradigm.

“[Bitcoin and the blockchain are] especially important and useful in countries where institutions are not working very well. El Salvador is one of them, but there are a lot of others, in Latin America and Africa, as well as other parts of the world, where banks are not very trustworthy and efficient.

This leap as legal tender in El Salvador signifies another step for crypto’s evolution. If the El Salvador experiment is successful, other countries just might follow its lead.

However, just as the Japan Times noted, El Salvador’s President Nayib Bukele is getting a mixed reaction from his efforts to embrace bitcoin.

Bukele just revealed major plans for a “Bitcoin City” at the base of the Conchagua volcano to be funded by Bitcoin-backed bonds and “powered by geothermal energy, the city would offer a tax-free haven,” according to the article in Japan Times.

While supporters salute his plans, believing the move will promote job growth, financial inclusion and foreign investment to the economically struggling country, others are seemingly offended by his large events, with Japan Times noting that the nation is haunted by poor public service, violence, and inequality.

Still, he is encouraging El Salvadorans to embrace the opportunity–what bitcoin can mean for the country– the opportunities it will bring and the potential of an evening of prosperity.

In other words, he says that people should “Feel the Bit”.

Is El Salvador’s move bold? Professor Biais says that it is. There are other questions that remain to be answered, like: Will it pay off? How will it play out? And how will it impact the wider world of cryptocurrency?

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