Bitcoin is a financial alternative in countries with economic crises, such as Venezuela and Zimbabwe. Separating the economy from politics is an advantage that Bitcoin would offer as a national currency.
Bitcoin has been cataloged by many as a method of payment of international scope, capable of becoming an exchange value accepted by merchants from all over the world. However, few have questioned the implications that a country might have to decide to adopt bitcoin (BTC) as its national currency. Due to the current political, social and economic conflict that Venezuela is going through, personalities from the ecosystem of cryptocurrencies have begun to speculate on what a country would be like to adopt bitcoin as a national currency and the consequences that this would bring.
Venezuela is recognized for the unusual adoption of bitcoin by its population, which has been motivated by the economic crisis that has been going on in the country for several years. This cryptocurrency has become a financial alternative for the citizens of that nation. Bitcoin is mostly a method of safeguarding value in the Latin American country, where it has come to quote 10% more expensive than in other nations.
The Caribbean country has become a focus of attention for the crypto world due to several elements, among which its paradigmatic use of bitcoin, its national and international political conjuncture and its exposure to cryptocurrencies at the governmental level, including the creation of petro. In this sense, many wonder if a country under the same conditions of economic instability and openness to cryptocurrencies could, in the future, decide to adopt bitcoin as its national currency. In addition, one could analyze how this would affect the economic policies of that nation.
An economy independent of the current governments, freer international trade and economic autonomy and without censorship could be some of the advantages offered by bitcoin to a country that has it as a national currency.
Economy Without Politics
Bitcoin is a financial tool that would help in contexts of political instability, such as those that currently exist in Venezuela.
Because Bitcoin is made up of users worldwide, it is very difficult that the political measures of a government in office can significantly affect the economy of any nation.
Unlike fiat currencies, which are issued by a central bank, bitcoins are issued in a decentralized manner by a network of miners scattered around the world. Which are free to devote as many resources as they choose to this activity. In addition, any person who has the necessary equipment and technology can dedicate themselves to bitcoin mining, without needing the authorization of any entity in the network. That is, power falls decentrally on its users. If a nation adopts bitcoin, it is very difficult for its internal policies and social problems to affect the value of this cryptocurrency and, therefore, not be devalued by the decisions of a current ruler.
At this point we must also take into account that adoption as a national currency would make the economy of that country is intimately linked with the international economy, since the valuation of the asset will depend on global monetary policies and how other nations, the Companies, commerce and individuals adopt this currency.
Another feature of Bitcoin that could be beneficial for a country's economy is its public and auditable nature. Any movement of money made by the State would be registered immutable in the blockchain of Bitcoin. So the citizens of the nation could verify if that money was actually transferred and to what Bitcoin address was deposited.
The fact that transactions have to be compulsorily public, coupled with the fact that none of the operations can be erased from the blockchain, would help to combat corruption at the top levels of government. In case of misappropriation of funds or attempt to steal money from the State, the evidence would be in the network to be reviewed by the international community.
This immutable record can also be very convenient if a group of personalities of the State want to steal assets from the nation and elope with them, since they would be the evidence on which address those assets were sent. Since Bitcoin is pseudoanonymous, international authorities are already developing methods to monitor these transactions and find the whereabouts of criminals.
The adoption of bitcoin as a national currency can also motivate a country to have better free trade policies. Currently, cross-border payments already represent a niche where BTC shines. This is because it allows its users to dodge government restrictions linked to exchange control. In addition, the commissions for this type of transactions through banks and other electronic transfer platforms are usually much higher than those of Bitcoin; In addition, these operations also take more time than it might take to send some satoshis to another corner of the world.
The fact that bitcoin is an international currency could fuel foreign investment, since its economy would be much more globalized and would have access to a greater number of markets. As with the dollar, bitcoin is a more direct access currency and traders would not have to make cumbersome currency exchanges to facilitate the import and export of products.
The nation that adopts bitcoin could also enjoy an international account unit, such as weight and distance. The currencies issued by governments are constantly compared with other currencies or assets, such as the dollar, the euro and gold, to estimate their market value.
Bitcoin is a reference unit in itself globalized. Something that would make it unnecessary to make constant monetary conversions to indicate the value of a product or the same national currency. This could motivate tourism and make it easier for foreigners to make purchases more freely in that nation.
One final advantage that a globalized and decentralized national currency can offer is economic autonomy, in addition to avoiding censorship at an international level. Any country could avoid sanctions and freely trade its trade with allied countries without having an intermediary.
Bitcoin is not ready yet
Although all this sounds very good and bitcoin is outlined as a financial option to take into account, the reality is that this cryptocurrency is not yet ready for a mass adoption, which can meet the demand of a nation. The volatility in the prices of BTC and, especially, its scalability problems are two of the big obstacles in order to fulfill the dream of a decentralized and global economy.
The instability of bitcoin prices is one of the reasons most cited by users of social networks to counteract this utopia, considering that a currency with such a volatile market could endanger the economy of a nation.
Although volatility is a point that worries many, bitcoin is volatile, precisely because it has been adopted by few people with great wealth. For this reason, until now there are not many that can influence the price of the cryptoactive. On the other hand, if a whole country adopts the cryptocurrency, this would lead to a better distribution of wealth, which would give bitcoin prices greater stability.
Scalability is really the big problem for an adoption on a massive scale. In fact, this point has been a brake on the business sector. For Bitcoin to work for an entire nation, it is necessary for its network to process millions of transactions per second without being collapsed.
Other users consider it impossible for a government to voluntarily decide to change its monetary system for the decentralization of Bitcoin. In this sense, Guillermo Torrealba outlined that this type of adoption could be carried out in those nations whose monetary crisis is unsustainable and in need of a paradigm shift.
Of course this is not going to happen with a government whose monetary policy is good, but with one that is destroyed, probably due to bad habits of its Central Bank. When the new government that takes power can only have the confidence of the people if it promises to get rid of the root problem.