El Salvador made news around the world by becoming the first sovereign nation to officially adopt bitcoin (BTC) as its national currency. While the law proposed by President Nayib Bukele and approved by Congress is about to go into effect, protests against the measure have been growing in the Central American country, bringing hundreds of people to the streets. All of them fear the possible negative effects that an unstable and decentralized cryptocurrency could have on the Salvadoran economy.
According to multiple local media reports, protests against the so-called “Bitcoin Law” are becoming increasingly common these past few weeks as its official implementation on September 7th approaches. These demonstrations have brought hundreds of people to the streets, strengthening a movement that is gradually growing.
The population fears that bitcoin will aggravate the crisis
According to Protestants, there are many risks to be considered once cryptocurrency is implemented in the economy. The main idea behind this new legislation is to give more monetary control to the country, which until then depends on the use of the US dollar, a currency that is under the power of the American central bank. But given the decentralized nature of bitcoin, Salvadoran authorities are likely to have the same problem with cryptocurrency.
While the US Federal Reserve (Fed) can adjust the supply of dollars and directly interfere in their price according to national needs, El Salvador, which currently has an economy almost entirely dollarized, has no say in any decision. Bitcoin would then enter as a monetary alternative to give more autonomy to the local economy and the population’s finances.
However, the measure proposed by President Bukele was approved by the Congress of El Salvador, in which the political coalition in power holds the majority of the seats, without actually listening to what the population has to say about it. Thus, growing protests in the streets argue that even if bitcoin is not the dollar and does not have a central authority controlling its supply, it is also not under El Salvador’s control. Furthermore, its price volatility could represent an enormous instability for the citizens of the Central American country.
Bitcoin is unstable, decentralized and “anonymous”
Rather than helping to solve existing problems, protesters believe the introduction of bitcoin as legal tender could exacerbate El Salvador’s financial crisis. Stanley Quinteros, a member of the Supreme Court workers’ union, told the Reuters: “We know that this currency fluctuates dramatically. Its value changes from one day to the next and we will have no control over it.”
Fear of the instability of the cryptocurrency has already led companies and local entities to take steps to discourage the use of digital currency, as it will be optional. The Salvadoran Association of International Cargo Carriers (ASTIC) has threatened to charge an additional 20% fee to those who pay freight in bitcoin to protect against the asset’s volatile nature.
Protesters also fear that the introduction of cryptocurrency into the economy could exacerbate the country’s well-known corruption problem, believing that bitcoin facilitates money laundering and other illegal activities.
Bitcoin usage is not mandatory
That said, the decision has already been taken, the law has been passed and the implementation of bitcoin will take place on September 7th in El Salvador. However, it is worth remembering that as much as the cryptocurrency becomes official in the country, it is not mandatory. Now, relying on the national currency and the US dollar, bitcoin becomes the third official currency in the nation.
Thus, Protestants primarily seek to discourage the use of bitcoin. After all, if the population does not adhere to the cryptocurrency, the country will remain dollarized and little will change in the economy. However, the most obvious and advantageous application of the digital asset is for international transactions. Since around 20% of Salvador’s GDP still depends on remittances sent by migrants, bitcoin provides a faster and cheaper alternative for sending money within the country.
With information: Business Insider, Euronews and Reuters