El Bitcoin Salvador
Is this the dream for every Bitcoin enthusiast or a proof that it is not going to work?
El Salvador, as of September 7th, 2021, is going to recognize and use Bitcoinas legal tender, together with the US dollar. If we don't count Venezuela's failed scam of Petro, this will be the first time that a government recognizes Bitcoin as a currency.
When it’s the first time for anything, there is massive uncertainty. This project is no exception.
Most people in El Salvador don't know what Bitcoin is. Most people have no idea where to get it and how they would use it. Everyone is quickly pointing out why this is not going to work.
The obvious question then is why El Salvador’s President, Nayib Bukele, would start such a risky project.
The answer is simple. Over 2.5 million Salvadorans live abroad and send money back home. In 2020, they sent back almost $6 billion, which is about 23% of El Salvador’s GDP.
If you are a CEO or CFO of a company, I am sure you would prefer to remove any friction in receiving 23% of your cashflow, so you get it as easily and quickly as possible.
In Bitcoin, Bukele has found a technology, which is legal in the US, has effective liquidity and is easily transferred from one place to another. It will be relatively simple for the government to exchange Bitcoin for fiat on Bitcoin exchanges round the world and save transaction fees for its people. The KYC (Know Your Customer) and AML (Anti Laundering Money) processes are reasonably well established, enough to minimize any illegal activities which a project like this will attract.
This is a startup project at its best. There’s a committed founder (in this case, El Salvador’s President) with vision and a decent strategy. With this audacious move, it seems he’s accepted the inevitable sleepless nights for the foreseeable future. Now we will see how well Bukele and his team can execute on this. The stakes are high, but so is the reward - better prosperity for El Salvador. One way or another, it will become a case study for MBA students around the world.
The recurrent pattern? We cheer on the spirit of brave entrepreneurs who take a leap forward, because some of these ventures even work out. Good luck, El Salvador.