By Chris Kline, COO and Co-Founder of Bitcoin IRA
The great El Salvadoran crypto experiment is in full swing, and observers are watching the first national use case in real time. Contrary to what the financial news coverage may indicate, El Salvador did not blow their chance at adopting digital assets into their financial system. In fact, the implementation of a new fiscal policy built on the infrastructure of digital currency may be the greatest socioeconomic experiment in any of our lives. Issues over wallet adoption may have led to a rough rollout, but El Salvador’s embrace of bitcoin is a testament to the promise of digital assets. In order for this experiment to become a success, the country must overcome man-made obstacles to truly capture the benefits bitcoin has to offer. Thanks to younger demographics, challenging economic conditions, and the government’s reliance on remittances, bitcoin in El Salvador has all the ingredients for success.
Bitcoin in El Salvador has many factors working in its favor. As a strength, the environment is ripe for such a bold attempt at financial freedom. With a relatively young population, we can expect adoption to be accelerated. The average age among El Salvadorans is 27. By comparison, the United States average age is currently 38. As we know from experience here in the United States, youth will take the driver’s seat in technological evolutions. Our youngest generation is bullish on crypto and recent surveys have found that millennials admit to owning cryptocurrencies in large numbers. Younger entrepreneurs, willing to disrupt traditional business practices, are spearheading major technological advancements and redefining how we shop, live, and work. With a large young population in El Salvador, millennials and generation z will only continue their out-of-the-box thinking and embrace new ideas.
El Salvador is also one of the poorest countries in the world, with a GDP per capita of $4,187. This will create a ripe environment for a fiscal revolution that could change the trajectory of the country’s future. Just as communism spread amongst the poor nations of Southeast Asia sixty years ago, the concept of something radically different like bitcoin has the propensity towards adoption in this impoverished environment due to its revolutionary promises of stability, institutional adoption, and growing utility.
With such a large piece of state revenues coming from remittances of families sending money back that work in other countries, the adoption of bitcoin is a no brainer for those looking for safe and reliable cross border transactions. With a weak banking infrastructure, El Salvadorans will be impressed at the speed, reliability, and efficiency of sending and receiving funds as bitcoin. As opposed to international money payment systems today that delay funds and charge higher fees than a typical bitcoin transaction, everyday El Salvadorans looking to do business overseas and financially support their families globally can do so thanks to the bitcoin’s reliable cross border functionally.
For an experiment of this size, hurdles will inevitability arise. While enthusiastic about the prospects of bitcoin and digital currencies, the El Salvadoran decision makers are imposing a government approach to decentralized money and creating government issued obstacles that could delay the true potential of the digital asset revolution.
Establishing a state-run wallet program was their first major blunder. With ample open-source solutions available in the crypto market already, it was foolish to think the national government could provide a better solution. Ideally, a state-run education program on how to create a wallet and register your public address with the government would be immensely easier for both the state agencies, and more importantly, the citizens of El Salvador.
Instead of trying to fix something that isn’t broken, the resources building the Chivo wallet should be diverted to beefing up a dismal telecom infrastructure currently plaguing equal access to the new bitcoin policy. Even better, the country should focus on attracting some outside investment through globalized markets, which could create the need for local jobs that can build the desperately needed towers, devices, and other tools of modern telecom systems. Talk about a win-win.
Lastly, years of embedded greed and corruption can be a hidden variable in this great social experiment. Although the new president and modern policies indicate El Salvador is anxious to shake off its junta past, legacies are often strongly rooted, especially in economic terms.
Critics quick to dismiss El Salvador’s adoption of cryptocurrencies should not make any hasty decisions about this first of its kind national experiment. As an experiment, we must remember that dropping a crypto policy onto a nation-state without expecting some issues and obstacles is absurd. That would be like dumping a 5,000-piece puzzle out of the box, and miraculously all the pieces fell perfectly into place. Results will take time and the government should be open to making major institutional changes that will ensure the success of mass bitcoin adoption. El Salvador is one of many experiments now and in the future, that will help define the global economic landscape ahead for all of us.
Chris Kline is the COO and Co-Founder of Bitcoin IRA, the world's first, largest, and most secure digital asset IRA technology platform
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.