The “Colón” began to circulate in El Salvador as legal tender from the year 1892 and remained in that position for more than one hundred years. In 2001, “dollarization” began, executing the decision that the US dollar would be the legal tender. Seven years later, in 2009 an idea was born that currently continues to revolutionize the world economy: Bitcoin (BTC). And one day, overnight, El Salvador came across the news that, as of September 7, 2021, BTC would also be a legal tender in the country.
At the economic level, the effects are yet to be seen, despite the number of professional opinions that have emerged around the world. At the marketing and strategic level, El Salvador has been placed in the world showcase waiting to know the results of the implementation of Bitcoin in El Salvador: will it have a positive impact on financial inclusion in the 70% of the population that does not have access to banking services?
All traditional regulation in fiscal, commercial and monetary matters is, to this day, an adventure of trial and error regarding cryptocurrencies (crypto). The easiest path has been to prohibit them, to put AML requirements impossible to fulfill even by traditional financial institutions, to create extraordinary tax presumptions, to block convertibility, biased news, etc. But why are crypto relevant to governments and the entire world? Although I didn’t want to use Gordon Gecko’s phrase, it really is all about money. No one thought to regulate crypto when Bitcoin was worth only pennies, but a slice of a trillion-dollar pie is perhaps worth the efforts of so many states to regulate it.
El Salvador is in a stage that feels like a scientific trial regarding the adoption of Bitcoin as a currency. To this day, we don’t know if a declaration of legality of BTC was the best choice or if a different treatment, for something that was not born to be a currency, would have been better. The entire country could turn out to be a sandbox for the creation of tailor-made regulation, as well as a global example of the good things to be replicated and the mistakes that must be avoided. The important thing will be to bet on a regulation that goes hand in hand with development and that shows flexibility to technology as something that can also be verified and controlled, and continue to give guarantees to the population.
These changes in technology, business and law, sure cause great excitement and expectation, but they must also call for prudence and to making informed decisions, knowing the risks and the ways in which they are mitigated. El Salvador can be an example of innovation and of how to make digital transformation processes transcend in an accelerated way, but it can also be an example of things not to do. Being optimistic, opportunities come out of everything, and many times those opportunities only come once, so we should take advantage of these new possibilities.