El Salvador is a small country in Central America, with a population of less than seven million and an economy of less than $30 billion, making it one of the poorest and most unequal countries in the world. The country has long been plagued by political instability, violent crime, natural disasters, climate change, and other issues, and its per capita income and standard of living are well below the Central American average.
El Salvador's economy is heavily dependent on remittances from abroad, which account for about 20 percent of the country's gross domestic product (GDP). More than two million Salvadorans live abroad, most of them in the United States, and send more than $4 billion a year to their hometowns. These remittances play an important role in household income, consumer expenditure, and social welfare in El Salvador.
However, these remittances are also costly and inefficient. According to the World Bank, the average fee for sending money from the United States to El Salvador is $65%, much higher than the global average of 49%。In addition, these remittances also need to be reviewed and converted by intermediaries, which is time-consuming and labor-intensive, which is not conducive to meeting the needs of both remitters and recipients in a timely manner.
To address these issues, El Salvador's Nayib Bukele came up with a bold plan in June of this year to use Bitcoin as the country's legal tender, in parallel with the US dollar. Bitcoin is a decentralized cryptocurrency that is not controlled by any ** or institution, and can be used for fast, secure, and low-cost cross-border transfers over the internet. According to Bukele, the adoption of bitcoin can reduce the cost and time of remittances, increase financial inclusion, attract foreign investment, improve fiscal conditions, and promote economic development.
Bukele's proposal was supported by the Salvadoran Congress, which on June 9 passed the Bitcoin bill with 62 votes in favor, 19 against and 3 abstentions, becoming the first country in the world to adopt Bitcoin as legal tender. The bill stipulates that Bitcoin will be regulated as legal tender in El Salvador and can be used for commodity pricing, payment and tax purposes; Bitcoin transactions will not be subject to capital gains tax; The onshore exchange rate between Bitcoin and USD is determined by the market. The bill came into effect on September 7, and El Salvador has become a "testing ground" and "weather vane" for bitcoin.
What difficulties did El Salvador's Bitcoin experiment encounter?
Although Bukele was full of confidence and expectations for Bitcoin, El Salvador's Bitcoin experiment did not go smoothly, but encountered a series of difficulties and challenges, including Bitcoin's volatility, technical failures, lack of regulation, and social **.
First of all, the volatility of Bitcoin is an issue that cannot be ignored. Bitcoin's ** is affected by a variety of factors such as market supply and demand, investor sentiment, policy influences, etc., and often rises and falls sharply, and can even change by thousands of dollars in a single day. This volatility poses significant risks and uncertainties to users and holders of Bitcoin, as well as a threat to El Salvador's economic and financial stability.
On the first day that Bitcoin officially became the legal tender of El Salvador, there was a sharp decline in Bitcoin, falling from more than $50,000 to more than $40,000, a decline of more than 10%, the largest one-day decline in nearly four months. This means that the 400 BTC that El Salvador** had purchased the day before had lost nearly $4 million overnight. And for ordinary people in El Salvador, their income and savings may also shrink significantly due to the volatility of bitcoin, and even face the risk of poverty and debt.
Secondly, technical failures are a problem that cannot be ignored. In order to promote and popularize the use of Bitcoin, El Salvador** has launched an official digital wallet called Chivo and installed more than 200 ATMs with bitcoin exchange capabilities. ** It also pledged to give out a $30 Bitcoin red envelope to everyone who signs up for a Chivo wallet to encourage them to use Bitcoin.
However, the operation of the Chivo wallet is not smooth, and many users report problems such as inability**, registration, login, transfer, exchange, etc., resulting in them not being able to use Bitcoin normally. Moreover, there are also security and privacy risks in the Chivo wallet, and it has been found that the *** of the Chivo wallet can be easily copied and scanned, thereby stealing users' funds and information.
Lack of regulation is a problem that cannot be ignored. The decentralization and anonymity of Bitcoin has brought huge problems and challenges to regulators. The transaction and flow of bitcoin may involve money laundering, tax evasion, terrorist financing, cybercrime and other activities, endangering the security and interests of the country. The use and holding of bitcoin may involve the rights and interests of consumers, the protection of investors, the soundness of financial institutions, the implementation of monetary policy, etc., and affect the economic and financial stability of the country.
However, El Salvador's Bitcoin Act does not have clear and well-established regulatory rules and mechanisms, nor effective and timely regulatory measures and means, nor does it have open and transparent regulatory information and data. This has led to the use and holding of Bitcoin, the lack of necessary legal safeguards and risk prevention, and also led to the transaction and flow of Bitcoin, the lack of necessary supervision and constraints, and also led to the impact and consequences of Bitcoin, and the lack of necessary assessment and response.
Societal is an issue that cannot be ignored. The introduction and promotion of Bitcoin has been widely opposed and resisted by Salvadoran society. According to a poll, more than seven out of ten Salvadorans oppose Bitcoin as legal tender, believing it to be a bad decision and unwilling to use it. Many people believe that Bitcoin is an unstable, insecure, and illegal currency, which is not suitable for the national conditions and people's feelings of El Salvador, nor does it conform to the interests and needs of El Salvador. Many people believe that Bitcoin is Bukele's personal ambition and political operation, to cater to international investors and supporters, to divert domestic contradictions and problems, and to cover up incompetence and corruption.
As a result, many people took to the streets and held various forms of activities to demand the withdrawal of the Bitcoin bill, the restoration of the independent status of the dollar, and the protection of the rights and welfare of the people. These activities not only affect the order and tranquility of society, but also affect the prestige and trust of the society, and also affect the promotion and popularization of Bitcoin.