Tuesday, September 7th, marked a historic day for both Bitcoin and El Salvador as the government officially moved to implement Bitcoin as legal tender. While many have been questioning the decision, it looks like Bitcoin could save the country $400 million a year in transaction fees and fund settlements alone, from services like Western Union and MoneyGram. (CNBC)
Remittances account for nearly $6 billion dollars or 23% of El Salvador’s GDP, and are used by nearly 70% of the country's residents. Those savings alone could be worth the initiative.
On launch day, the rollout of the country’s official wallet, Chivo, was rocky. The app was initially unavailable for Apple and Huawei platforms, and for those that could download it, the server connection was intermittent.
The timing of the Bitcoin rollout coincided with a “flash-crash” in the crypto markets—with Bitcoin dipping as low as 20% on the day of the launch. (Reuters)
The world is watching to see how El Salvador will adapt and fully adopt Bitcoin. Still, the experiment chugs along and others are taking note. Two other Central American countries, Honduras and Guatemala, have formed committees to officially migrate their currencies to crypto; but, instead of leveraging a crypto behemoth like Bitcoin, they are exploring the world of central bank digital currencies or CBDCs. (Cointelegraph)
While Bitcoin is clearly here to stay, CBDCs allow governments the advantages of the blockchain without sacrificing control over the currency. Transferring a national currency to the blockchain would enable more accountability and a complete, transparent record of transactions. An obvious benefit of CDBCs would be to deter crime by leaving an easy-to-follow financial footprint while servicing the millions of citizens, who to this day, remain unbanked.
But, if a central bank holds the keys to the financial kingdom, it promotes the benefits of blockchain for efficiency and transparency, while leaving behind the essential qualities of decentralization of power and control, inherent to cryptocurrencies like Bitcoin.
As parts of Central America grapple with crypto adoption, the U.S. faces yet another debt crisis. Janet Yellen has warned lawmakers that the U.S. could experience a national debt default as early as October. She stated, “Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history.” (New York Times)
The fallout for such an event would certainly ripple across the global financial markets, and lawmakers are scrambling to develop a solution—the most direct course of which is to raise the debt ceiling. Historically, raising the debt ceiling is a partisan vote, typically assisting whichever party’s administration holds office.
This time around isn’t much different, as Democrats urge to raise the debt ceiling due to COVID relief payments and infrastructure tacking on costs, while the Republican party is hesitant to add more debt to the pile. We’ll see how this plays out shortly enough, but the best guess is lawmakers will squeak out a way to keep raising the roof.
While the U.S. is faced with many economic divides, top Fed officials pushed this week for a “quick taper” despite stagnant US job growth. James Bullard, president of the St Louis Fed, called for “the central bank to begin scaling back or tapering its massive $120bn-a-month bond-buying program soon.” (Financial Times)
The real question is—will we slow down printing money and flooding into the economy anytime soon? We’ll see.
While the battle of the money printer wages on, major Layer 1 blockchain protocols, or smart-contract platforms, are having a serious moment in the crypto spotlight. This past week, Ethereum continued its historic rise, briefly breaching $4K before consolidating in the mid $3K range. But persistently high gas fees have spurred competition for a potential “ETH-killer.”
Solana (SOL) experienced an absolutely monumental rise this year, going from a January price of less than $2 to over $200 (over 11,400% from trough to peak). Many believe the rise is due to its smart contract capability at a lower cost and faster speed than Ethereum. (Cointelegraph)
And it’s not just SOL that’s vying for ETH’s throne. This weekend, Cardano will implement Alonzo, an upgrade that brings smart contract capability to the Cardano platform. Algorand is another contender in the mix, which made its first splash last year and is continuing to grab investor’s attention as a hedge against Ethereum. Both have risen substantially over the past months, largely as a bet that there’s room for more players in the smart contract space.
The stakes are getting higher for Layer 1 platforms, and investors are placing their bets. Only time will tell who will come out on top.
Top market movers as of September 10, 2021
- Algorand (ALGO) +55%
- Solana (SOL) +27%
- Terra (LUNA) +24%
- Icon (ICX) +19%
Cointelegraph > "El Salvador's largest bank partners with Flexa for Bitcoin payments"
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