By Chris Kline, COO and Co-Founder of Bitcoin IRA
The big crypto experiment in El Salvador is in full swing and observers are following the first national use case in real time. Contrary to what the Financial news Reporting could suggest that El Salvador didn’t miss its chance to add digital assets to its financial system. Indeed, implementing a new fiscal policy based on the infrastructure of digital currencies could be the greatest socio-economic experiment in our lives. Wallet adoption issues may have resulted in a crude launch, but El Salvador’s adoption of Bitcoin is evidence of the promise of digital assets. For this experiment to be a success, the country must overcome man-made barriers to truly reap the benefits of Bitcoin. Thanks to recent demographics, tough economic conditions, and the government’s reliance on remittances, Bitcoin has all the ingredients for success in El Salvador.
Bitcoin in El Salvador has many factors that work in its favor. As a strength, the environment is ripe for such a bold attempt at financial freedom. With a relatively young population, accelerated adoption can be expected. The average age under El Salvadoran is 27 years old. This compares with the average age in the US for now 38. As we know here in the United States, the youth will take the driving seat in technological development. Our youngest generation is optimistic about crypto and recent surveys have shown it found that millennials admit that they own cryptocurrencies in abundance. Younger entrepreneurs willing to break traditional business practices are leading significant technological advances and redefining how we shop, live and work. With a large young population in El Salvador, Millennials and Generation Z are just going to continue their out-of-the-box thinking and embrace new ideas.
El Salvador is also one of the poorest countries in the world, with GDP per capita of $ 4,187. This will create a ripe environment for a fiscal revolution that could transform the country’s future. Just as communism spread among the poor nations of Southeast Asia sixty years ago, the concept of something radically different like Bitcoin tends to be adopted in this impoverished environment because of its revolutionary promises of stability, institutional acceptance, and growing utility.
With such a large chunk of government revenue coming from remittances from families sending money back that works in other countries, Bitcoin adoption is a breeze for those looking for safe and reliable cross-border transactions. With a weak banking infrastructure, El Salvadorans will be impressed with the speed, reliability, and efficiency of sending and receiving funds as Bitcoin. Unlike international cash payment systems, which today delay funds and charge higher fees than a typical Bitcoin transaction, everyday El Salvadorans who do business abroad and want to financially support their families around the world can do so thanks to Bitcoin’s reliable cross-border functionality.
For an experiment of this size, obstacles will inevitably arise. While El Salvador’s decision-makers are excited about the prospects for Bitcoin and digital currencies, they are forcing a government approach to decentralized money and creating government-issued barriers that could delay the true potential of the digital asset revolution.
Setting up a government wallet program was her first big mistake. With numerous open source solutions already available in the crypto market, it was foolish to believe that the national government could offer a better solution. Ideally, a government education program on how to create a wallet and register your public address with the government would be immensely easier for both the government agencies and the citizens of El Salvador.
Instead of trying to fix something that isn’t broken, the resources that are building the Chivo wallet should be redirected to build a gritty telecommunications infrastructure that is currently hindering equal access to the new Bitcoin policy. Better still, the country should focus on attracting some outside investment through globalized markets, which could create the need for local jobs who can build the much-needed towers, equipment, and other tools of modern telecommunications systems. Talk about a win-win situation.
After all, years of embedded greed and corruption can be a hidden variable in this great social experiment. Although the new president and modern politics suggest that El Salvador is eager to shake off its junta past, the legacy is often deeply ingrained, especially in economic terms.
Critics who are quick to reject the adoption of cryptocurrencies by El Salvador shouldn’t make hasty decisions about this first national experiment of its kind. As an experiment, we have to remember that it is absurd to drop a crypto policy on a nation-state without expecting some problems and obstacles. It would be like throwing a 5,000-piece puzzle out of the box, and miraculously, all of the pieces fit together perfectly. The results will take time and the government should be ready to make major institutional changes that will ensure the success of the mass adoption of Bitcoin. El Salvador is one of many experiments now and in the future that will help define the global economic landscape for all of us.
Chris Kline is the COO and co-founder of Bitcoin IRA, the world’s first, largest and most secure IRA technology platform for digital assets
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.