In Global First, El Salvador Adopts Bitcoin as Currency

This volatility is one of many obstacles to applying the lessons from a sleepy beach town to a national financial system. Bitcoin price swings could challenge the government’s ability to meet conversion needs. And if the trust fund is liquidated, taxpayers may be left holding the bag, argues George Selgin, a monetary economist at the Cato Institute.

But crypto advocates say Bitcoin is just the first step into a bigger world of alternative financial services that could facilitate receiving remittances from abroad — which Salvadorans increasingly rely upon — and attract investors.

Matthew Sigel, head of digital assets research at the global asset management firm VanEck, has questions about how the government fund will operate but believes crypto can help El Salvador “shake off the yoke of dollar colonialism,” perhaps with creative investment vehicles that bypass traditional channels and Bitcoin mining operations that harness natural resources.

To many observers, the move is emblematic of Mr. Bukele’s tendency toward autocracy.

A charismatic young leader who wields social media to amass fans and spar with enemies, Mr. Bukele has increasingly used his grip on the country to concentrate power and silence opponents.

Last week, Mario Gómez, an outspoken critic of the Bitcoin law, was briefly detained without a warrant and had his cellphones seized by police.

“There is a deterioration in the freedom of the press and in freedom of expression,” said Otto Flores, a lawyer representing Mr. Gómez. “It’s worrying — you can’t deny it.”

Article source: https://www.nytimes.com/2021/09/07/world/americas/el-salvador-bitcoin.html