El Salvador may become the first nation to make Bitcoin legal tender, joining a host of Latin American nations that are turning to digital currency to fight both inflation and potential corruption.
Nayib Bukele, the current President of El Salvador addressed the Bitcoin 2021 Conference in Miami via a prerecorded video. In the video, Bukele states that in the coming weeks, he will introduce a bill that would make Bitcoin legal tender in El Salvador.
Strike CEO Jack Mallers commented
âOver 70% of the active population of El Salvador doesnât have a bank account. Theyâre not in the financial systemâŠThey asked me to help write a plan and that they viewed bitcoin as a world-class currency and that we needed to put together a bitcoin plan to help these people.â
One reason why many Salvadoreans donât have a bank account is due to the high cost of banking services relative to income. While many in the global North donât think about banking services as being expensive, in many nations, they are prohibitively costly.
Bitcoin and Crypto is The Right Direction
In many cases, nations that have a high percentage of impoverished citizens also have a low number of citizens with access to financial services. This is true in Latin America, as well as India, and many other areas of the world.
Sadly, poor nations also have a track record of abusing their financial systems to benefit a dominant political party, and also further antagonize the poor that simply donât have the means to finance their lives in any other way.
Without a viable alternative, many poor people are left in a truly hopeless situation, and many may not understand that it is being done to them via regulations at a national level.
Clearly, El Salvador isnât on the same path as Venezuela, or India, at least in a monetary sense. The move by Bukele to use Bitcoin as a currency in the nation will help to raise the profile of cryptos globally, which is likely a good thing for the global poor.
Money as a Control Mechanism
In Venezuela, the situation appears to be very different from the one in El Salvador.
Venezuelaâs captive population has seen roaring inflation in the last decade, and repeated attempts by current president NicolĂĄs Maduro to exploit both the national crypto, called the Petro, and the nationâs monetary system to exert control over the increasingly isolated country.
It could be argued that the Petro was the first national cryptocurrency, however, it is seen as worthless, and not used by any person or nation that can avoid it.
Instead, people in Venezuelaâs broken economy use cryptos that can easily be sent from overseas, where family members have fled in hopes of finding some work, and money to help their loved ones escape starvation.
Why Crypto Makes Sense
The poor have little say in a governance structure, even when some amount of democracy is permitted.
The Indian demonetization in 2016 is a perfect example of this. Many in India have no bank accounts, so when still President Modi opted to demonetize most of the nationâs currency, the poor were left in a terrible situation.
While a nation can make cryptos illegal, it would have a much harder time enforcing laws that banned their use â especially at a village level.
This is a major advantage for cryptos and one that will almost guarantee that they will survive the governments that are currently working to either regulate their use â or ban them outright.
Despite what the power-mad technocrats of todayâs governments may think â power comes and goes. In this age when Western cities are burning and global borders are as complex as they have ever been, it is likely that simple systems that empower the masses will gain in popularity.