Cryptocurrencies and the El Salvador effect in Latin America

Matias Bari

09/15/2021 12:56 PM

• Clarín.com

• Economy

Updated 09/15/2021 12:56 PM

Twelve years have passed since

Satoshi Nakamoto imploded the world of mainstream finance

.

Cryptocurrencies were born out of a parallel economy with a spirit of monetary freedom and for a time they stayed on the sidelines, limited to a niche audience of cryptophiles, web pioneers, fintech and tech-based startup entrepreneurs.

A decade after that encrypted big bang

, names like Bitcoin and Ether, among other crypto assets,

settled in the glossary of economists and the common people

replicated by the media.

The reason?

At the end of 2019 the steep rises and the immeasurable gains of many of the holders focused the focus on the phenomenon.

The market developed in volume and with a high market cap for the companies that exploited the business.

Where the indifferent eye only saw a numerical sequence of ones and zeros, an unprecedented multiplier

r of wealth was registered with effects that could be translated into real economic space.

Today the Latin American political agenda is debated between the pro-crypto avant-garde

that tries to imitate the flexibility of Estonia, Latvia, and other countries of the former communist Europe, and

those Latin governments that see in the advance of decentralized finance a digital demon

to which exorcise with the regulatory weight of the State.

In the experience of the region, the proposed regulations generally focused on identifying financial intermediaries and cryptocurrency exchanges, granting official licenses to these operators and, in some cases, establishing the need to register users' personal data and even of the operators involved in the transactions.

The regulatory anxiety of some States in the face of the crypto phenomenon, of a sui generis economic nature and mutable dynamics,

encountered some resistance within the digital community,

which is usually suspicious of any attempt to open the news, which they see as an intrusion to privacy.

El Salvador shook the regulatory board a few months ago by announcing that it

would be the first country on the globe to make Bitcoin a legal tender.

Only 16 articles were enough for the president and promoter of the initiative, Nayib Bukele to make this advance.

Bukele,

with his forty years and millennial stamp, is the youngest president in Latin America and a prolific user of social networks

with which he seeks to position himself as a leader with a world reference point of zero.

Bukele, used to giving orders on Twitter to his cabinet ministers who retweet his commands with a:

"Right now, the president,"

promulgated the Bitcoin Law with the aim of regulating the cryptocurrency and officially recognizing it as a financial asset.

In the Central American country, as long as it is offered as a means of payment,

economic agents will be obliged

-as of September 7-

to accept it in any purchase of goods and services

, except in those cases where the person due to their economic limitations does not count with the technological resources to carry out the operation. To advance the measure, Bukele installed 200 bitcoin ATMs throughout El Salvador. BTC has no monetary base so the government created a fund of 150 million dollars to support conversions between the digital asset and the US currency.

The president is confident that the country will save US $ 400 million 

that its citizens spend on the commissions that financial institutions charge them to receive money from abroad

.

Boldness, impulsiveness or resourcefulness?

Only time can judge what happens in the economy of El Salvador, which today works as a laboratory for one of the most disruptive regulatory moves in crypto assets.

Less radical were other experiences in the region that leaned towards a progressive adaptation of cryptocurrencies in the economy.

Until the Bukele legislation, the most advanced country in Latin America to implement regulation was Mexico

.

In his Fintech law - with its pros and cons - he dedicated a central space to digital assets, although he focused more on the entities that issue them and not so much on transactions between private users. The Mexican State defined the framework of cryptocurrencies and enabled the practice for financial institutions, but limited to the approval of its Central Bank that intervenes in all operations.

The influence of El Salvador penetrated more deeply in Panama,

which through its legislative assembly days ago began to discuss a project to regulate cryptocurrencies and accept them as a means of payment.

The initiative introduces the novelty of enabling its use to cancel tax charges and debts with the treasury

, which the State then has to exchange into stablecoins to avoid the volatility of a state stockpile of the most fluctuating crypto assets.

This project also dedicates

a special chapter to crypto mining,

allowing the activity with the use of renewable energy and forcing the miners of the network to pay 25% of their net profits for the annual extractions of bitcoin.

In South America, self-regulation of the crypto market still predominates, although projects that seek to limit or define its scope are also envisioned.

In Uruguay, a recently entered bill seeks to regulate the sale and storage of cryptocurrencies to give a legal framework to the activity and attract foreign capital investment.

If successful,

the State would be the one who monopolizes the granting of licenses to the different operators.

The advance of regulation in Brazil is slow and moderate, although financial authorities have been showing nods to the use of cryptocurrencies.

In Paraguay, a project linked to bitcoin is advancing, with similarities to the case of El Salvador, but more focused on promoting crypto mining.

In Argentina, cryptophiles multiply and flourish day by day, initially motivated to find alternatives to the local currency and a refuge from the effects of inflation, but their regulation so far is oscillating. The ruling party, led by President Alberto Fernández, presented in the last months of 2020 a project, which has not yet seen the light, to fully regulate all the edges that touch the universe of crypto assets.

The initiative raised some alarms among Argentine jurists

due to its regulatory breadth and the imprecise objective of controlling the cryptocurrency market. The counterproposals to the project maintain that the State, through its National Securities Commission, has to limit itself to adapting new technologies and allowing the creation of securities linked to a particular blockchain system. The specialists also warned of the risks of moving forward with a law that equates exchanges with a traditional banking entity.

Argentina has not yet defined a clear position on the future of cryptocurrencies in the country

. However, recently the head of the Central Bank Miguel Ángel Pesce, analyzed that it is necessary to teach with the population to explain

what these instruments are about that can favor people's access to the capital market

and recognized the dynamism that fintech contributes. To the system.

The legal path of the countries of the region is as heterogeneous as the multiplicity of currencies that make up the crypto ecosystem.

The supranational nature with which these assets are manifested means that their financial transactions cannot be easily intervened by the states, a crossroads for the regulatory intentions of both Latin American countries and the rest of the world.

The privatization of monetary issuance will continue to bother governments

, at least as long as they persist in wanting to train cryptocurrencies.

In summary, that

El Salvador adopts Bitcoin as legal currency is a very important advance for the ecosystem.

Most likely, we will see its impact in the long term.

It is one of those events that enter the history of Bitcoin and cryptocurrencies.

Just as once the first operation with Bitcoin was carried out, or when a material good was acquired -as happened in bitcoin pizza day-, what happened in El Salvador is a momentous episode.

That a country allows paying with Bitcoin is something incredible and I have no doubt that it will be a starting point for other states to do the same.

SN

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