Remittances, inflation, and politics are three reasons why more countries may follow El Salvador’s lead next year.
El Salvador’s decision to make bitcoin legal tender within its borders has sparked some debate.
While some locals were dissatisfied, many prominent figures, including Michael Saylor, praised the move as “extraordinary” and “world-shaking.”
The world is still waiting to see if this is the start of a successful monetary revolution or just another attempt by a top political figure to gain power and support.
In a recent blog post, Alexander Höptner, CEO of the cryptocurrency derivatives exchange BitMEX, joined those who believe this could be a highly beneficial initiative.
The executive stated that he is not surprised that all those in charge of the current financial system, including the World Bank, Moody’s Investors Service, and others, have aggressively attacked El Salvador. “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 continued.
Furthermore, he predicted that at least five developing countries would replicate this experiment by 2022. And now for the arguments.
A significant proportion of people from countries such as El Salvador work abroad in order to send money to relatives and thus provide a better lifestyle for them back home. And, while major financial institutions are “ripping people off” with high fees and slow transactions, Höptner believes that bitcoin “with its near-negligible fees and quick 24/7/365 transactions” may be the best solution to the problem.
This is not the first time BitMEX’s CEO has drawn parallels between digital assets and traditional finance. In a recent interview with ULTCOIN365, he stated that developments in the crypto field are occurring at a “much faster pace:”
“What we’ve seen happen in the traditional financial world over the last 30 years happened in the crypto industry in two years.”
Höptner’s next reason is the risk of rising inflation as a result of the COVID-19 pandemic’s consequences. It goes without saying that developing countries would face far greater difficulties than advanced economies. When the financial system is shaken by inflation, people usually look for alternatives to fiat currency, such as bitcoin. As proof to that statement, BitMEX’s CEO pointed out to Turkey:
“As Turkey’s inflation rate soared well above 15% this year, crypto adoption skyrocketed.” Turkey quickly responded by prohibiting the use of cryptocurrency for goods and services, but inflation is now at 19.25 percent.”
Many other well-known figures supported the idea that the primary cryptocurrency can be a successful hedge against economic downturn. Billionaire Paul Tudor Jones III and Dawn Fitzpatrick are among those who believe bitcoin’s maximum cap of 21 million coins can be the best tool against the recent mass printing by central banks.
Bitcoin is more than just a digital currency. It is also a technology, a store of value, and a representation of the future financial system, according to many. As a result, if it becomes an official means of payment, politicians will want to position themselves as “progressive, populist, and new age thinkers,” according to BitMEX’s CEO.
Despite being a supporter of such an initiative, Höptner warned that top politicians’ popularity may rise due to bitcoin rather than what they have accomplished in their careers:
“This will not be a love letter to El Salvador’s President Bukele, who is betting his political future on the successful implementation of this policy.” Of course, I support the policy, but I believe there is a long-term risk in giving too much credit to individuals in the crypto space.”
As a result, he believes that if a politician who has played a significant role in the adoption of BTC fails as a leader, the image of the leading digital asset will suffer.