There is no shortcut to a country’s economic development and social progress except hard work.
Produced by Positive Solution
Recently, Bitcoin collapsed.
According to data from CoinGecko, Bitcoin has fallen by more than 70% since reaching its peak of $69,000 in November last year.
Tens of thousands of people have lost all their money, and one country has also suffered miserably.
This is the poor Latin American country El Salvador , the first country in the world to use Bitcoin as legal tender.
El Salvador is located in Latin America, south of Mexico , adjacent to Guatemala and Honduras .
If we could sum up El Salvador in three words, they would be small, poor and chaotic.
El Salvador covers an area of more than 20,000 square kilometers and has a population of about 6.7 million. It is only one-third larger than Beijing, but its population is less than one-third that of Beijing.
El Salvador is one of the poorest countries in Latin America, with about one in five people living on less than $5.50 a day.
Salvador’s per capita gross national income Chart: Huajing Industrial Research Institute
El Salvador is known as the “murder capital of the world” and is one of the most chaotic countries in the world.
There is a set of shocking data:
The population of El Salvador is only over 6 million, but the number of members of the two largest gangs exceeds 70,000, and the number of people associated with gangs is as high as one million.
Between January and July 2015, 3,400 people were murdered in El Salvador, which is even more dangerous than in Iraq and Afghanistan where terrorist attacks have been rampant.
El Salvadorans pay US$756 million in protection fees to gangs every year, accounting for about 3% of the country's GDP.
Police arrested gangsters
On March 26 this year, a big event happened in El Salvador.
The country's largest gangster group murdered 62 innocent civilians in one day in revenge for the government.
The Salvadoran government immediately declared a national emergency and arrested 10,000 gang members within 15 days.
Police arrest gangsters
The law and order chaos in El Salvador is evident.
As the saying goes, in troubled times, heroes emerge.
In 2019, Nayib Bukele, who was born in the 1980s, took office as President of El Salvador. As soon as he took office, Bukele announced that combating crime would be a priority policy issue.
El Salvador President Nayib Bukele
The main measures he has taken include allocating funds to purchase equipment to arm the military police, authorizing the police and army to use "lethal weapons" to fight crime, and sending soldiers to patrol the streets...
Data shows that homicides in El Salvador The crime rate has dropped from an average of 9.2 cases per day before he took office to the current average of 3.8 cases per day.
governs the country with an iron fist and is quite effective.
Bukele’s most shocking move was not to fight crime, but to gamble heavily on Bitcoin.
In June last year, at the Bitcoin Conference, Bukele announced that El Salvador would circulate Bitcoin as legal tender.
Bukele’s subsequent series of operations proved that he was not just talking.
First there is legislation.
On June 9 last year, the Salvadoran Congress passed the "Bitcoin Law" with 62 votes out of 84 members, approving the use of Bitcoin as the country's legal tender. This bill officially came into effect on September 7 last year.
Legally speaking, El Salvador has officially become "the first country in the world to use the digital currency as legal tender."
is purchased again.
El Salvador has established a $150 million fund specifically to purchase Bitcoin.
According to Bukele’s tweet statistics, from September 2021 to May 2022, the El Salvador government purchased 10 Bitcoins, holding a total of 2,301 Bitcoins, with a cumulative purchase cost of more than US$101 million.
The record of the El Salvador government purchasing Bitcoin
is indeed a real investment from the treasury.
is the final package.
Simple common sense in economics tells us that there are five basic functions of money, namely, value standard, means of circulation , means of storage , means of payment and world currency.
Among these basic functions, value scale and means of circulation are the most important and basic functions of currency.
As the legal currency of El Salvador, if Bitcoin wants to truly circulate, legislation alone is not enough.
To this end, the El Salvador government has adopted a two-pronged approach in terms of software and hardware. For
software, policy discounts are provided. It stipulates that commodity prices can be displayed in Bitcoin, taxes can be paid in digital currency, and Bitcoin transactions are exempt from capital gains tax.
In terms of hardware facilities, more than 200 ATM machines that can trade Bitcoins have been installed across the country. Bitcoins in personal digital wallets can be converted into US dollars and withdrawn without paying handling fees.
ATM that can trade Bitcoins
The El Salvador government also launched the official digital wallet Chivo in September 2021. As long as ordinary people download and register, they can immediately receive 30 US dollars, and the benefits are comparable to Pinduoduo.
The El Salvadoran government is really trying hard to promote Bitcoin.
El Salvador desperately promotes Bitcoin, but it has not been recognized by the people.
The El Salvador Chamber of Commerce once conducted a poll. The results showed that 93% of people opposed the use of Bitcoin to pay wages, and 83% opposed the use of Bitcoin for remittances.
On September 15, 2021, which coincided with El Salvador’s Independence Day, thousands of demonstrators took to the streets of the capital San Salvador to protest against President Bukele’s autocratic approach to force Bitcoin to become the national legal tender.
National protests
To say the least, Bitcoin itself is very controversial. Many countries, including China, Vietnam , and Indonesia, have explicitly banned Bitcoin transactions.
Why does El Salvador want to "eat the first crab" and list Bitcoin as the national legal tender?
one, save money.
El Salvador’s economy has a unique feature: more than 22% of its GDP comes from overseas remittances .
According to World Bank data, in 2020, El Salvador’s overseas remittances to the country totaled more than 5.9 billion US dollars, mainly from the United States.
The El Salvadoran government’s calculation is that if these expatriates use Bitcoin to remit money, they can save a lot of money.
Second, attract investment.
Bitcoin is a new thing and a hot topic.
In the context of most countries banning or rejecting Bitcoin, the "little-known" El Salvador can take the opportunity to become the focus of global attention by declaring Bitcoin as legal tender.
And because it allows legal Bitcoin transactions, El Salvador has also become one of the few Bitcoin "safe havens" in the world, attracting Bitcoin-related transactions and financial activities.
In fact, after El Salvador allowed Bitcoin to be legalized, it attracted a large number of Bitcoin believers and curiosity seekers, driving the tourism industry.
Booker took the opportunity to propose an even crazier plan - to build a "Bitcoin City" and build a power plant to provide energy for the "Bitcoin City" and Bitcoin mining.
As soon as the news came out that Bukele proposed to build a "Bitcoin City"
, European real estate companies came one after another and purchased land near the "Bitcoin City" in bulk at prices 3 to 5 times higher than usual.
Third, make money.
Investing is not charity. When Bukele invests in Bitcoin, he definitely wants to make money.
As the president of a country, Bukele frequently announces on Twitter that he will buy Bitcoin.
Bukele’s Twitter content
is nothing more than speculation and arbitrage.
Fourth, self-marketing.
Bukele is a businessman and knows the importance of marketing.
As early as when he was the mayor of the small town of Nuevo Cuzcatlán, Bukele promoted the town through social media and brought attention to the coffee town.
Whether he is playing , Twitter, , or betting on Bitcoin, Bukele is creating his own cutting-edge and fashionable persona to gain national support.
Bukele took a selfie at the United Nations
Judging from the trend of Bitcoin, El Salvador suffered a loss of more than 55 million US dollars in Bitcoin investment, with a discount of more than 50%. It was indeed a heavy loss.
Bitcoin trend
If you include expenses such as developing software and configuring ATMs, the loss may exceed US$200 million.
Under the loss, Booker had to come out to appease people.
He stated on social media that Bitcoin investment is safe and its value will rise sharply after the bear market. He also suggested that citizens should stop looking at price charts and instead enjoy life.
Elejandro Zelaya, the Minister of Finance of El Salvador, gave an even more convincing explanation, bluntly saying that El Salvador has no financial risk because "El Salvador has not sold Bitcoin, and if it has not been sold, there is no loss."
In fact, regardless of profit or loss, El Salvador should not invest in Bitcoin, let alone use it as legal tender.
On the one hand, the price of Bitcoin is prone to violent fluctuations, and using it as a legal currency undermines the integrity and stability of the country's financial market.
On the other hand, El Salvador’s investment in Bitcoin with its national treasury is more like a gamble and not something a modern country would do.
For a small, poor, and unstable country like El Salvador, it is indeed difficult to develop the economy.
It is precisely for this reason that the El Salvador government hopes to use Bitcoin in order to "go astray."
However, there is no shortcut to a country’s economic development and social progress except hard work.
Individuals should not speculate, let alone the country.
