In June of 2021, EL Salvador made the historic move by becoming the first country to consider Bitcoin as part of their legal currency. This move was made to combat corruption internally and end their reliance on the U.S. Dollar. While this choice has left many unsure of what this may hold for the future of the country and the role of cryptocurrency, many of those in the international community will see it as an opportunity for El Salvador to become the world’s largest social-economic social experiment by implementing a crypto-based economy.
The implementation of different currencies is something familiar to El Salvador; in 2001, El Salvador dropped their currency, the Salvadorean Colon, for the U.S. dollar because of a civil war that left over 80,00 dead in the decade prior. This significant move aimed to reduce inflation and improve the monetary policy that the country was heavily lacking. Two decades later, El Salvador would find itself in a new position riddled with heavy corruption and crime, a failing infrastructure, and a heavy dependency on the United States. This would come to a complete overhaul when President Nayib Bukele was elected in 2019. Bukele saw the adoption of Bitcoin as a major solution to the country’s problems, with implementation to track transactions electronically and by providing freedom from the U.S. Dollar.
A significant benefit of Bitcoin was its ability to modernize the banking system for most of El Salvador’s population. Given that only 20% of El Salvador’s population has a bank account, and 90% have smartphones, the government saw the implementation of Bitcoin as a great move to speed up the electronic payment process. To help with the adoption process, the Salvadorean government introduced the Chivo app for purchasing and installing Bitcoin ATMs nationwide. When the application was rolled out, every new citizen would be given $5 worth of Bitcoin. While the current transaction values are still tied to the dollar, the goal is that, eventually, all payments will be stated directly as Bitcoin.
The adoption of Bitcoin by El Salvador will also significantly impact marketing and business-to-business processes. Major brands such as Walmart, McDonald’s, and Starbucks all accept the use of Bitcoin from their customers throughout the country. While they initially had issues, most reports claim that the country has implemented the process seamlessly. As Bitcoin continues to become more established, major retailers can work with suppliers directly with Bitcoin. On a smaller scale, businesses can also sell products to other companies using Bitcoin, providing discounts and other benefits.
Implementing Bitcoin in El Salvador as currency is a significant landmark for the history of cryptocurrency and the country. While there may be skepticism about its future, many businesses may be able to study this model and the benefits or drawbacks moving forward to implement their plan on operating with cryptocurrency, especially when marketing or doing business with other companies.
https://www.wsj.com/articles/the-new-york-couple-behind-el-salvadors-bitcoin-experiment-a94446f4
https://fortune.com/2022/01/04/crypto-banned-china-other-countries/