- Remittance fees cost the citizens of El Salvador more than $ 400 million a year
- It is highly unlikely that a large developed economy will take the lead from El Salvador.
- Just under 90 central banks around the world are exploring the idea of launching a CBDC
According to William Je, CEO of the institutional investment firm Hamilton Investment Management, the adoption of Bitcoin (BTC / USD) in El Salvador as legal tender is not a model for the future, but an exception to the rule. The expert finds that the adoption questions the viability of decentralized cryptocurrencies as analogous to national currencies, subject to centralized control.
Let us remember that El Salvador is a developing economy and a nation with a history of currency exchange. In 2001, El Salvador replaced its national currency, the colón, with the US dollar. Its adoption of bitcoin as legal tender is due to the same challenge the nation faced 20 years ago, which is that just under a quarter of the country’s GDP comes from remittances from its citizens living and working abroad.
Remittance fees cost the citizens of El Salvador more than $ 400 million a year according to the government of El Salvador. Furthermore, the majority of the country’s population does not have a bank account. Adopting a cryptocurrency can create access to a variety of other financial services for the first time.
IMF and other global creditors warn against crypto adoption
Global creditors like the International Monetary Fund are increasingly expressing concern over the adoption of a stateless, decentralized cryptocurrency like Bitcoin, which is a highly speculative asset. According to Je, it is highly unlikely that any major developed economy will take the lead from El Salvador.
More and more countries are considering their own digital currencies
At the same time, a growing number of countries are considering launching their own digital currencies. Data from the Atlantic Council shows that just under 90 central banks around the world are exploring the idea of launching a CBDC.
China has been testing the e-CNY (digital yuan) since April 2021. The United States is exploring a digital dollar through two programs. The Bahamas launched a digital version of its dollar and Nigeria introduced eNaira this year.
Will UK launch CBDC stablecoin in 5 years?
In the UK, the Bank of England and HM Treasury are in talks about the future launch of a CBDC stablecoin, which is expected to happen between 2025 and 2030. Individuals and businesses will be able to use this digital currency for their payment needs. daily, the Bank of England said. It will be used in parallel to cash and bank deposits.
William Je commented on the emerging trend of CBDC among central banks as a final note:
A CBDC could be created out of thin air by central banks with quantitative easing just like with traditional currencies, but this arguably defeats the object of a digital currency.