Bitcoin and its impact on the Salvadoran economy

Photo: Courtesy.
Editorial Dept. Voz de la Diaspora

Becoming the first country in the world to establish Bitcoin as legal tender, represents great challenges for El Salvador amid the rejection of part of the population, and the criticisms of those who consider unconstitutional the Law that will enter into force in September, while analysts recommend improving financial education, and internet access.

In this context, the International News Agency Voice of the Diaspora analyzed the impact that this decision will have on the Salvadoran economy, and offers the population lights on the importance of better training in the knowledge of digital products such as cryptocurrencies, including Bitcoin, which will allow them to make better decisions when investing.

For this purpose, four experts from different countries with experience in the financial field as well as in law, analyze the subject from their perspectives and knowledge during the forum "Bitcoin and its impact on the Salvadoran economy".

The virtual meeting had the participation of experts in the virtual currency market, Matias Dajcz, representative of the company Ripio, a Cryptocurrency broker with headquarters in Argentina, and more than two million users, the CEO of Latamtech de Chile and creator of the Blockchain Summit of Latin America, Christopher Pereira.

Felipe Baselga joined the panel of experts, financial advisory partner of the Deloitte firm with more than 18 years of experience in European and Central American markets in matters such as structuring corporate operations, and the Executive Director of the Foundation for Studies for the Application of Law (FESPAD), Saul Bathrooms.

Expert voices

Matías Dajcz said that in recent years the use of virtual currencies has been on the rise, becoming a global trend with greater growth opportunity in countries with restrictions.

Gravel, the company that Dajcz runs was born in Argentina just to serve this new market in a country with a weak economy, high levels of inflation, and the devaluation of the currency, becoming an ideal scenario that encourages the use of cryptocurrencies.

“The more restrictions there are in the countries, there are more incentives to use alternative media or alternative assets in this case of the digital economy ”, Dajcz stated.

Ripio with only eight years of experience in the market has established itself as the main financial services company in Blockchain in Latin America with more than 2 million users, added Dajcz.

Meanwhile, Christopher Pereira, CEO of Latamtech de Chile and creator of the Blockchain Summit of Latin America, raises education as a crucial and necessary element for the proper use of cryptocurrencies, which would also allow the population to better understand the Law, as in the case of El Salvador.

Pereira explained that the Salvadoran Bitcoin Law came as a “surprise” to the markets when it was announced by President Nayib Bukele, and that the approval seemed to be too rushed, however, it considers that it is "concise and precise in terms of its functionality".

Despite this, there are still some "doubts" regarding the Law, Also striking is the lack of education regarding what Bitcoin implies and cryptocurrencies in general., he explained.

Pereira said that although El Salvador has the so-called "Bitcoin Beach", what is a specialized area, and extensive knowledge about virtual currencies "there is all the rest of the country that should understand" so that the process is as less traumatic as possible.

“Many eyes are looking at El Salvador for what is going to happen in the coming months., what will happen the 7 September when the law comes into force, because it will be an experiment that all Latin American countries are following ", affirmed the expert.

Pereira recalled that in Chile the use and growth of Bitcoin was more due to remittances leaving the country and not as a means of payment, since it is a strong economy with good performance, a stable financial system, and a financial inclusion that reaches between 90 and the 92% population.

"Yes, it is used by foreigners who come to Chile to work and who use Bitcoin as a way to send remittances", he explained.

Analysts

While, the lawyer Saúl Baños, Executive Director of the Foundation of Studies for the Application of Law (FESPAD) From El Salvador, evaluates the Bitcoin Law from the point of view of unconstitutionality.

Baños agrees with other experts that the law has formal flaws, and does not follow the procedure that the Constitution of the Republic of El Salvador requires as it is not submitted to popular consultation.

"This law, because it is so weak, is not capable of answering by itself., nor to answer many questions that have been asked by the population. That is why the population has shown discontent and disapproval of the law ", he pointed.

From the perspective of analyst Felipe Baselga, financial advisory partner of the firm Deloitte, there are still doubts in the market as to whether the law will be applied as intended due to factors such as education and knowledge limitations, for that reason it considers that "initially the adoption of this currency will be limited".

Baselga added that the imposition of the law shows distrust in the acceptance of the currency., and that although it can attract users, international funds, facilitate transactions and, in the long run, provide some independence against the dollar, It is also important to note that it will generate distrust of certain international institutions opposed to this type of assets.

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