Remittances, inflation, and politics: those are the three reasons why more nations could follow El Salvador’s move next year.
El Salvador’s decision to officially make bitcoin a legal tender inside its borders has caused some controversy.
The world is yet to find out whether this would turn out to be the beginning of a successful monetary revolution or another attempt from a top political figure who aims to win power and support.
In a recent blog post, Alexander Höptner – Chief Executive Officer of the cryptocurrency derivatives exchange BitMEX – placed himself next to those who believe this could be a highly beneficial initiative.
The executive said he is not surprised that all those heading the current financial system, such as the World Bank, Moody’s Investors Service, and more vigorously attacked El Salvador. However, “what the critics fail to recognize is that developing countries like El Salvador are leading the world in embracing decentralized digital currencies and payments,” Höptner added.
Moreover, he predicted that at least five developing nations would follow this experiment in 2022. And here are the arguments.
A substantial percentage of people coming from countries like El Salvador work abroad to send funds to their relatives and thus provide a better lifestyle for them back home. And while leading money service companies are “ripping people off” with high charges and slow transactions, bitcoin “with its near-negligible fees and quick 24/7/365 transactions” could be the best solution to the problem, according to Höptner.
This is not the first time when BitMEX’s CEO compares digital assets and traditional finance. In a recent interview for CryptoPotato, he said the developments that are going on in the crypto field are happening at a “much faster pace:”
“What we’ve seen happen in the traditional financial world in the past 30 years happened in 2 years [in the crypto industry].”
The next reason that Höptner gave is the risk of rising inflation after the consequences of the COVID-19 pandemic. It goes without saying that developing countries would struggle much more than advanced economies. And when inflation starts shaking the financial network, people usually seek alternatives to fiat currency such as bitcoin. As proof to that statement, BitMEX’s CEO pointed out to Turkey:
“As inflation climbed well above 15 percent this year in Turkey, crypto adoption surged. Turkey responded by quickly banning the use of crypto for goods and services, but inflation is now at 19.25 percent.”
Many other prominent names also stood behind the idea that the primary cryptocurrency can be a successful hedge against economic crisis. Billionaire Paul Tudor Jones III and Dawn Fitzpatrick are some of those who believe bitcoin’s maximum cap of 21 million coins can be the best instrument against the mass printing that central banks have executed recently.
Bitcoin is not only a digital currency. It is also a technology, a store of value, and according to many – a representation of the future financial system. As such, politicians will have an interest to position themselves as “progressive, populist, and new age thinkers” if they decide to make it an official means of payment, stated BitMEX’s CEO.
Despite being a supporter of such an initiative, Höptner warned that top politicians might increase their popularity not because of what they have achieved throughout their work but because of bitcoin:
“This won’t be a love letter to President Bukele of El Salvador, who is staking his political future on the successful rollout of this policy. I support the policy, of course, but I think there’s long-term risk in giving too much credit to individuals in the crypto space.”
Subsequently, he opined that if a politician who plays a significant role in the adoption of BTC fails as a leader, this might automatically hurt the image of the leading digital asset.