The existing traditional financial system has failed many countries, leaving them dependent on the US Dollar; however, the meeting in El Salvador demonstrated that nations want to change and see Bitcoin as an opportunity to do so.
Sri Lanka missed its deadline to pay 78 million USD in foreign bond payments on the 18th of April.
The government is now on the verge of its largest default in history, owing 12.6 billion USD in foreign obligations.
Mass riots follow the default course amid petroleum, and food, power shortages. In such a case, a country with limited natural resources and economic power has left little to no recourse except to temporarily engage in excessive money printing to pay wages.
The Fed boosted its balance sheet by 4.5 trillion USD within the last two years, triggering an inflation rate of more than 8%, four times greater than its target of 2%. However, this is insignificant compared to Sri Lanka’s roughly 30% inflation, which is expected to reach 40%.
Small-cap penny stock trading, not national currencies, has historically seen such volatility. Still, there is a distinction between having a global reserve currency as a buffer and relying on it.
“There aren’t enough dollars available to open letters of credit,” Sri Lanka’s energy minister summarised the catastrophic scenario based on this subservient fiat currency position.
In other words, the dollar is superior to every other currency, notwithstanding the Fed’s unprecedented money supply expansion, which produced inflationary depreciation, the Bretton Woods legacy.
Davos for Bitcoin
El Salvador’s president, Nayib Bukele, announced on Monday, May 16th, that he had hosted a key central banking gathering. It drew 32 central banks and 12 financial organizations from 44 nations, earning the moniker “Davos for Bitcoin.”
Many of the attendees are from emerging countries experiencing economic difficulties similar to Sri Lanka.
The conference’s theme was financial inclusion.
This word has fallen out of favor. The not-invited International Monetary Fund (IMF) has exploited it as a Bretton Woods byproduct to enlist states into its debt system. Although the organization was created to assist countries and manage financial crises, little evidence supports this.
“According to my examination of economic patterns in 68 nations over nearly three decades, governments that sign IMF agreements receive around 25% less FDI than countries that do not,” says Nathan Jensen, a Washington University in St. Louis professor of political science and author of an IMF study published in the Journal of Conflict Resolution.
At the same time, Bitcoin was built to overcome this money allocation challenge as decentralized money outside of the central banking system, as noted by the Genesis block message. El Salvador’s conference is the initial step in educating central banks about how to achieve it.
The team in charge of this education includes Nicolas Burteny, founder of Haloy Money, behind the Bitcoin Beach wallet.
Mark of a New Era
While just 20% of El Salvador’s adults use the government-sponsored Chivo wallet, the country has seen a 30% increase in tourism since the Bitcoin tender law was passed. However, it is safe to assume that this is simply the start of a trend.
After all, achieving widespread adoption took 10 years of Bitcoin development, which included a number of various Bitcoin wallets that gradually improved user experience and reduced entry barriers. A year later, a central banking conference was held in the same country to encourage acceleration.
Whether or if El Salvador’s conference signals the start of a new Bretton Woods, the Davos Agenda clearly promotes digital financial inclusivity. The WEF, on the other hand, sees CBDCs as a way to achieve this inclusion. While digital currency issued by central banks is digital money, it does not imply a monetary system reset.
Developing countries can now choose an alternative approach that will not lead to another failing central banking system.