HOUSTON, Texas — Bitcoin and other cryptocurrencies have long been a topic of debate. Many argue over the pros and cons of this digital currency. With El Salvador adopting bitcoin as legal tender in September 2021, discussions about cryptocurrency are even more prevalent. Though it will take time to fully display its impact, Bitcoin presents a possible solution to global poverty.
El Salvador Adopts Bitcoin as a National Currency
In September 2021, El Salvador adopted bitcoin as legal tender. El Salvador is the first country in the world to do so and it has been off to a somewhat rocky start. The country has dealt with several technological issues as well as a dip in cryptocurrency. Additionally, people are wary of the transaction between dollars and tiny amounts of cryptocurrency.
Rollout continues as large chains in the capital such as McDonald’s and Starbucks have begun accepting bitcoin from phones. Additionally, the Salvadoran government is rolling out a network of 200 Chivo ATMs to help introduce consumers to Bitcoin. On October 1, 2021, El Salvador started testing and installing new mining equipment that harnesses power from a volcano.
If President Nayib Bukele, who came up with the plan for adopting Bitcoin, accomplishes a successful rollout, it is very possible that the change will benefit the impoverished Salvadoran economy. Government officials in El Salvador claim that the adoption of Bitcoin will increase the affordability of services, widen payment options and increase financial innovation. If successful, other countries could adopt cryptocurrency as well, amplifying Bitcoin’s ability to lessen global poverty.
South America has a history of hyperinflation, as seen in Venezuela where banknotes are now worth more as novelty items than as cash. Unlike wealthy Westerners, citizens of developing nations are excluded from the benefits of a higher money supply. Their spare capital is far too small to be efficiently invested, and the majority lacks the ability to earn interest to protect any savings they do have. Forbes reported that “70% of El Salvadorians are unbanked.”
Bitcoin is different because it has a finite supply. There will only ever be 21 million bitcoins, according to Forbes. As demand for Bitcoin increases, its value increases. The finiteness of the currency prevents inflation, thus helping lessen global poverty.
Unlike most national currencies, central powers cannot control Bitcoin as it runs entirely on blockchain. It lacks any transaction fees, which will help poorer people in developing countries to increase returns and invest without extra fees. Cryptocurrency allows the most impoverished people to make investments that they have control over. By preventing outside interference in investment, cryptocurrency creates an even playing field for the wealthy and poor.
Bitcoin operates outside of the current system, meaning it has no central authority. Because governments and banks cannot interfere with bitcoin transactions, people cannot be discriminated against in using the currency.
Cryptocurrency is also very safe and hard to steal, which further limits corruption. One issue with foreign aid is that it is difficult to ensure that it ends up in the hands of those who need it. For example, a large portion of the $130 billion in aid that the U.S. has given to Afghanistan since 2001 had been siphoned by the Afghan ruling class. Additionally, corrupt governments taking aid for themselves has been an especially prevalent issue in several African countries. Using Bitcoin and its ability to prevent corruption can help alleviate this issue.
GiveCrypto is a nonprofit that allows people to donate and distribute cryptocurrency to people living in poverty. It currently accepts Bitcoin as well as several other cryptocurrencies. GiveCrypto is able to “send cryptocurrency directly” and instantly to any recipient, including people who don’t have bank accounts. This is especially helpful for people living in countries like Zimbabwe and Venezuela where hyperinflation and failing national banking infrastructure are major issues.
GiveCrypto is still in the early stages of growth. It is currently testing and searching for the most successful ways to help people with cryptocurrency. The organization is partnered with Coinbase, a cryptocurrency platform with more than 70 million users. It is currently working on creating global programs that aim to build financial freedom through cryptocurrency. Donating crypto instead of credit ensures privacy, protects data and can have tax advantages.
Bitcoin and the world of cryptocurrencies continue to be a heavily debated topic as more of the world becomes interested in its potential. For people and countries who lack financial stability, cryptocurrency could be a viable solution. With its ability to stop corruption, prevent discrimination and prevent inflation, Bitcoin has the potential to have a major impact on global poverty.
– Jacqueline Zembek