El Salvador has become the first country in the world to accept bitcoin as a legal tender, a movement that has opened the debate on the risks and advantages of using cryptocurrencies. For two weeks, bitcoin has coexisted with the dollar, which the Central American country adopted two decades ago, and each citizen is free to choose the currency they prefer, on the other hand, Salvadoran companies and businesses are obliged to accept this cryptocurrency if the customer so wishes.
The acceptance of the new currency comes three months after the Salvadoran Legislative Assembly approved the so-called Bitcoin Law in express format and in the midst of a great social upheaval, with protests in the streets included. And it is that many citizens fear that the cryptocurrency could end their savings, be used for money laundering or favor corrupt government structures. International organizations such as the World Bank and the International Monetary Fund have also been against its adoption.
Some misgivings that, in addition, have gained weight after bitcoin suffered a strong devaluation as soon as the new law came into force. El Salvador bought 400 bitcoins to celebrate the official status of the cryptocurrency in the country. At the time of purchase, the amount was equivalent to about 16.7 million euros. A few hours later, bitcoin had devalued 17%. The Central American country had lost about two million euros along the way and had dragged other cryptocurrencies that operate in the world, such as Ethereum, which was devalued by 6.1%.
And it is that betting on cryptocurrencies is a risky option due to its volatility. Bitcoin has suffered pronounced devaluations since its use has become popular, however, its value can also increase considerably in a short space of time, and that is what the hundreds of thousands of users in Latin America bet on. Especially in inflationary countries.
The government of Nayib Bukele has presented the measure as a way to boost economic development and employment and benefit those who send remittances. And to encourage its use in a country where the majority of the population does not have internet access, the government is inviting Salvadorans to download a new digital wallet application that gives away $ 30 in bitcoins to all citizens.
LATIN AMERICA The use of bitcoin and other cryptocurrencies has not stopped growing in Latin America for almost a decade and has now increased in Central America after the passage taken by El Salvador. In fact, a few days ago in Honduras the first cryptocurrency ATM was inaugurated and Panama is considering accepting the use of bitcoin as one more option in the country.
“What has happened in El Salvador is a turning point in the economic policies that countries take and it is very important,” reflects Alberto Gómez Toribio, director of the title of University Expert in Development of Blockchain Applications at the International University of La Rioja (LINK). “It can turn around how Latin American countries are managing their economy because many of them are tremendously dollarized, they use the dollar as a currency directly, like El Salvador, or as a reserve in their central banks. It is a turning point that added to the The growth of the Chinese economy and the importance of the yuan means that the United States is at a time when it is probably close to losing its hegemony, “he says.
“It is foreseeable that some countries, starting with those that have a weak monetary policy due to many inflation factors, mismanagement in some cases, or the United States trade blockade, such as Cuba, will adopt this because it represents a form of independence and of attracting capital from abroad, “says Gómez Toribio.
But not only its use is growing in Latin America, Europe is one of the territories where cryptocurrencies are used the most. “Cryptocurrencies are used mostly to invest and Europe is the place where most investments are made in cryptocurrencies. In Latin America, on the other hand, they do not have a majority use in the field of investment, they are used more to make payments,” explains the college professor.
In Spain, almost 15% of the population currently invests in digital currencies. And while only 2% declare their interest in investing in the stock market, 30% do so to do so in cryptocurrencies.
ADVANTAGES AND RISKS According to Gómez Toribio, one of the main advantages that cryptocurrencies offer is that “they enable you to access global investment opportunities.” “There are other advantages that we are less interested in in Europe but that are tremendously interesting in other countries, for example, the issue of remittances. When you send remittances, you have to pay between 7 and 12% as a commission to the banks, do it to through cryptocurrencies means paying less, “he says.
“Cryptocurrencies are something that great wealth, great fortunes especially value. They are not confiscable, a judge can seize an account in a bank but cannot seize your cryptocurrencies, this is tremendously valuable for people who have large capital and want to I am not talking about people only here in Europe, but about people in politically unstable territories where there are changes of government, harsh measures that imply the confiscation of funds from citizens as happened in Argentina, and these people legitimately decide to protect themselves with these instruments ” .
But cryptocurrencies also carry risks, volatility is not theirs. “They are an investment asset, a product and logically it has risks and that means that it also has a return. When we talk about financial products, all of them, absolutely all have risk,” says the university professor, who nevertheless points out that “the risk will be the that you want to assume, depending on the product you have contracted. “
Currently, one bitcoin is equivalent to about 40,000 euros.
In Spain, almost 15% of the population currently invests in digital currencies. And while only 2% declare their interest in investing in the stock market, 30% do so to invest in cryptocurrencies.
they make it easy for you to access
global investment “
“They are an investment asset, a product
and of course it has risks “
Alberto Gómez Toribio
Blockchain technology expert