The heart of Bitcoin’s purpose is to establish an accessible and equitable financial system for the billions who are denied conventional banking facilities. El Salvador, a country where most people live hand-to-mouth and depend heavily on cash, is attempting to resolve this issue.
According to Stanford and Georgetown University alumnus Jonathan Martin, the long-term savings benefits offered by Bitcoin, for many, are negated by the challenges of understanding, using, and managing the currency. For them, attaining resources for basic needs such as food or shelter takes precedence over embracing this digital currency.
However, initiatives are being taken to address this. DitoBanx CEO, Guillermo Contreras, is creating Bitcoin-based savings and loan products for unbanked Salvadorans. Contreras highlighted the reality of Salvadorans’ daily economic struggle, with an average daily income of just $15 and limited access to ATM or loan services.
Even after launching the government’s cryptocurrency wallet, Chivo, and distributing $30 worth of Bitcoin to every Salvadoran, the success was short-lived. Most people converted their Bitcoin into traditional fiat currency soon after the initial surge, revealing an underlining apprehension towards embracing cryptocurrency.
But Contreras holds a visionary approach in easing Salvadorans into this new-age economy. By providing access to Mastercard debit cards, users are slowly introduced to the world of Bitcoin. They can convert Bitcoin transactions into USDC, a stablecoin secure against Bitcoin’s price volatility, and owned by the U.S.-based company Circle.
The eradication of price volatility with DitoBanx’s easy-to-use solution could be beneficial for users who would otherwise suffer due to fluctuations in the value of their scarce resources. Furthermore, DitoBanx’s plan to launch a micro-loan program could exponentially enhance economic growth.
Yet, concerns persist. The global banking system is yet to warm up to Bitcoin. It isn’t easy to foresee a Bitcoin-friendly Salvadoran banking environment, largely due to the existing structures and the banks’ integrations with corresponding U.S. banks and the broader SWIFT system.
Another hurdle is the fear among bankers of the repercussions of adopting digital currency and endangering their international relations, especially given that remittances, largely done via conventional gear, constitute 25% of El Salvador’s domestic economy.
Bitcoin’s acceptance isn’t uniform, even within El Zonte Beach—widely known as Bitcoin Beach—the hub of Salvadoran Bitcoin adoption. But, the Hope House, a community center focusing on Bitcoin education for local youths, presents a promising picture.
The verdict is thus a mixed bag. While Bitcoin seems like a promising solution, the opacity of its mechanisms and its volatility create a sizeable wall preventing its large-scale embracement. Further, Bitcoin’s constant comparison against fiat currency, rather than seeing it as a standalone value measure, accentuates its adoption difficulties. While it’s too early to state if the cryptocurrency will thrive universally, its propagation is undoubtedly driving a discourse toward a major financial shift.
Source: Coindesk
