Cardano founder predicts other nations will copy El Salvador

Edward Snowden also believes there is now pressure on other nations to “acquire bitcoin”

Salvadoran flag and bitcoin                                 
El Salvador now accepts bitcoin as legal tender – Photo:Shutterstock
                                

Following El Salvador making history by becoming the first country to accept bitcoin as legal tender, Charles Hoskinson, the founder of Cardano, has predicted that numerous other countries will follow suite.

Hoskinson tweeted out a video titled Congratulations Bitcoin and stated that 7 September was his father’s birthday and a “very important day for the industry as a whole”.

Hoskinson made the prediction: “In the coming years, many more nation states will use crypto as part of their monetary policy, either as reserves in their central banks or using cryptocurrency rails for central bank settlements, or potentially just simply taking a cryptocurrency as El Salvador has done and make it the national currency.”

Nothing in human history has grown that quickly

Hoskinson explained how, when he joined the bitcoin space back in 2011, the market was very different.

The founder of Cardano said: “Not only do nation states now take it seriously, today (7 September) a nation state decided to embrace it to a level of making it legal tender.”

Hoskinson commented on how fast bitcoin adoption has been and added: “Frankly, nothing in human history has grown that quickly, that aggressively and has inspired this degree of philosophical conversation, polarisation and opinions to form.”

The founder of the third highest-ranked crypto, according to CoinMarketCap, also believes that the contributions of every innovator in this industry need to be recognised, as they have “collectively led to a point where every single nation state from here on forward has to actually have a cryptocurrency strategy”.

Snowden enters the fray

Edward Snowden has also tweeted regarding El Salvador’s move, and echoed Hoskinson’s words.

Snowden said: “Beyond the headlines, there is now pressure on competing nations to acquire bitcoin – even if only as a reserve asset – as its design massively incentivises early adoption.

Snowden is a former computer intelligence consultant who leaked highly classified information from the National Security Agency (NSA) in 2013 and had previously worked for the Central Intelligence Agency (CIA). Snowden became a well-known name after his stories were leaked to The Guardian and The Washington Post.

A bold move by El Salvador

Two professors from the University of Warwick have come out for and against the move by El Salvador.

Professor Ram Gopal, head of the Gillmore Centre for Financial Technology at Warwick Business School, which conducts research into cryptocurrency, said: While the timing and the bull rush into bitcoin without ensuring the appropriate infrastructure and education is in place is questionable, this is indeed a bold move by El Salvador.

It is not at all surprising that there are birthing pains, as is always the case with any innovation, but these will ease. The broader message that is important is that cryptocurrencies are here to stay. What form they take, whether it is fully decentralised as bitcoin, or alternative forms such as stablecoins or CBDCs [central bank digital currencies], is yet to unfold and is an interesting space to watch.

Teething problems

The birthing pains Gopal is referring to are the issues experienced when El Salvador started to accept bitcoin as legal tender on 7 September. Salvadoran president Nayib Bukele tweeted that the Chivo wallet app, used to support BTC payments, ran into problems due to capacity issues.

The wallet had to be unplugged to deal with the high demand, said Bukele. He tweeted in Spanish: “For a few moments Chivo wallet won’t work, we have disconnected it while increasing the capacity of the servers. The installation problems that some people had were for that reason. We prefer to correct it before reconnecting.”

The opposing view 

On the other hand, Ganesh Viswanath-Natraj, an assistant professor of finance at Warwick Business School,  elaborated on the three main issues that come with making bitcoin legal tender in El Salvador, the first being the volatility that comes with the cryptocurrency.

This, Viswanath-Natraj said, feeds into the second point: that those who use bitcoin will see wild swings in their savings, which will then lead to “volatile consumption, hours worked, and therefore cause greater swings in output and inflation”.

Finally, as banks are now allowed to hold bitcoin deposits, they will see large fluctuations in their deposits. The professor said: “As balance sheets become more volatile, bank lending and credit channels to households and firms are disrupted.” 

The professor did, however, add that cryptos do promote financial inclusion which "can help provide effective savings for El Salvador residents".

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Further reading: Bitcoin becomes legal tender in El Salvador

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