24/05/2021 - 06/06/2021
El Salvador becomes the first country to adopt the Bitcoin Standard...
El Salvador's president, Nayib Bukele, has announced plans to make Bitcoin legal tender in the country. If his plans are enacted by congress, El Salvador would become the first country in the world to formally adopt the digital currency as part of its economy.
El Salvador's economy relies heavily on remittances, accounting for roughly 20% of its GDP. However, these remittances can be slow, expensive and inconvenient, with incumbents charging fees of more than 10%. Indeed, the ability for digital currencies such as Bitcoin to vastly reduce the costs of remittances has already been widely acknowledged, but this is the first time a country has explicitly adopted a cryptocurrency for that purpose.
Since crypto-payments firm Strike launched its mobile payments app in March, it quickly became the country's number one downloaded app, aiming to make the Bitcoin Network more accesible to El Salvadoreans. Strike's CEO, Jack Mallers, described the latest policy transformation as the "shot heard around the world". Certainly, international policy makers will be taking note of this latest development. Although, given El Salvador's modest population of 6 million, the news doesn't quite constitute a financial earthquake. An early-warning tremor though? Perhaps.
In a tweet thread, president Bukele justified his decision as an effort to boost financial inclusion:
Importantly, Bitcoin is seen as simply the first step in a new financial revolution intended to bring investment, credit and more to its underbanked population. As more and more of the world moves towards digital currency adoption, we are working hard to build the tools which make financial services accesible to everyone. The Creditcoin Network can help us build the foundations of trust for tomorrow's inclusive economy, helping us create a new decentralized market for credit. A market in which anyone, anywhere can borrow and lend funds with the trust they need.
Policy & Regulation
- Iran has issued a ban on most cryptocurrency mining in an effort to curb energy usage and avoid summer power blackouts, reported Decrypt. Iran, which accounts for almost 4.5% of Bitcoin’s total hash rate, has blamed unlicensed cryptocurrency mining for its surging electricity demand.
- US institutions are in a “sprint” to set and harmonise crypto regulations, reported Reuters. Randal Quarles of the Federal Reserve described the development of a proper institutional framework for supervision as a “high priority” with results "expected soon".
- OnePlus, the Chinese Smartphone manufacturer could be the latest brand to launch a 'Cryptophone', reported Decrypt. The phone would follow in the footsteps of HTC and Samsung who have already offered ‘cryptophones' before, with the HTC Exodus even being capable of running its own Bitcoin full node.
- The former head of China’s CBDC initiative, Yao Qian, has said that future CBDCs could operate on Ethereum, reported CoinDesk. Nevertheless, Yao urged a cautious approach, given the very real risks of potential smart contract vulnerabilities.
- The European Investment Bank has warned that an annual investment gap of “up to €10 billion” in AI and blockchain technologies is holding the EU economy back. China and the US together account for 80% of investment into blockchain and AI.
- China has launched its own copyright protection blockchain, reported CoinDesk. The blockchain, dubbed the “China Copyright Chain”, will be used to document proof of digital assets, monitor infringements, issue copyright notices, and help courts settle copyright related lawsuits.
- 26% of financial advisors are planning to use or recommend cryptocurrencies to their clients over the next 12 months, CNBC reported. This is up from a mere 1% in 2020. Though most advisors still urge caution, recommending a total portfolio crypto exposure of around 1-2%.
- NFT sales are down 90% from their peak, reported Cointelegraph. The number of NFT wallets showing activity has also dropped by 70% since early May. However, some sub-categories are still showing strength, for example, sport token sales have dropped by a much more modest 55%.