Despite some bumps, the roll out envisioned and enabled by El Salvador’s president–Nayib Bukele—is now underway. The country will go down in history as the first to embrace Bitcoin as sovereign currency. But its main benefit is the roadmap that this transition provides for nations and companies looking to embrace Bitcoin.
The El Salvadorian grand scale adoption means that corporations in El Salvador must accept Bitcoin as legal tender. Citizens were given $30 of Bitcoin into their state-issued chivo wallets (chivo means “cool” in El Salvador), from which they can spend their Bitcoin as they see fit. And with this change in law, corporations like McDonalds and Starbucks, had no choice but to update their technology to accept Bitcoin from El Salvadorian citizens.
The implications of major corporations now having the technical prowess to integrate into the Bitcoin lightning network and offer speedy transactions is enormous. This skillset can be applied to their locations around the world. Thus, El Salvador forced these retail behemoths into the crypto lab (El Salvador is now McDonald’s and Starbuck’s testing site). Think of it as the new McCrypto sandwich being tested in only some facilities before full scale role out.
Also, with major corporations now accepting Bitcoin, it’s part of the crypto narrative that governments around the world must take into account. The regulatory debate over whether crypto is a security or a currency is again the spotlight.
The question is: If McDonalds and Starbucks can accept crypto as payment, how should crypto be regulated? As a currency or as a security?
Ultimately, the world will come understand that crypto is its own creature. Crypto cannot be easily defined and fit into the box of existing banking and security laws. Governments, and even world-wide financial organizations, need to examine the technical underpinnings of blockchain and crypto and create a new regulatory framework.
To date, instead of looking at cryptocurrencies for what they are, governments appear to be threatened by them. In fact, the IMF’s latest quibbles over the risks of Bitcoin in El Salvador sound more like fear of crypto taking over, rather than the protection of people.
The mass adoption of cryptocurrencies in transactions will turn fiat dollars on its head—and not just the head of the US dollar’s George Washington. Global capital is controlled by the monetary policies backing fiat currencies across the globe. These currencies are ripe for disruption by way of crypto.
In fact, leaders in many countries that are prone to hyperinflation may consider Bitcoin; leaders in countries like Venezuela, Cyprus, Turkey all have turned to currency devaluation as means to boost government spending. The US does the same, but we have been less susceptible to hyperinflation thus far.
With a supply cap of 21 million, Bitcoin is an appealing alternative. AndI if El Salvador can become independent from the US dollar and resist its inflationary qualities, countries with unstable currencies can do the same. This choice make sense. Since if you are a sovereign nation like El Salvador, and you do not want to be pegged to the currency of another nation, by choosing Bitcoin you can remain independent and escape from another foreign country’s monetary control.
Despite Bitcoin becoming popularized during this cycle with institutional adoption, the everyday use of Bitcoin for the masses still seemed futuristic. But El Salvador has proved otherwise. The lightning network allows Bitcoin to scale, so that transactions can take place fast enough for such mass adoption. And all eyes are now on El Salvador now to see how this will play out.
Will there be a lesson for the world to learn from El Salvador?
I believe the lessen is that you don’t have to wait for the promise of decentralization and all the benefits of democratized crypto—it’s best to jump headlong into this space, solve problems as they emerge, and embrace our sovereign futures through crypto.