El Salvador’s government encouraged people to use Bitcoin, but Argentina’s crypto growth was mostly spontaneous.
The techniques and consequences of the two paths – top-down and bottom-up – are significantly different.
It’s too early to say whether the technique has a higher chance of long-term success, but the bottom-up approach appears to be performing better for crypto acceptance in a country so far.
El Salvador’s approach to Bitcoin
When El Salvador declared Bitcoin to be legal money, all companies were required to accept BTC as payment.
The Salvadoran government issued a custodial digital wallet, gave its users $30 in free Bitcoin, and subsidized transaction costs to encourage Bitcoin use.
Despite these incentives, researchers from the University of Chicago discovered that Bitcoin is only used in 4.9 percent of all sales in El Salvador. 88 percent of enterprises change Bitcoin earnings for fiat cash, according to the study.
“You can’t expect to succeed by replacing one part of a financial system,” Messari analyst Dustin Teander told The Defiant.
“Because one piece [of the financial system] is dependent on the others, there is additional friction if they don’t all work together effectively.” El Salvador, according to the World Bank, has high crime rates, natural disasters, and growing poverty rates.
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Why El Salvador is lacking behind
Researchers discovered that the majority of Bitcoin users in El Salvador were young, educated men and that over 90% of the population did not utilize mobile banking.
Nayib Bukele, the president, is working to alter that. In November, he declared that the government intends to construct ‘Bitcoin City’ at the base of the Conchagua Volcano.
“The concept is that the local economy would be based on Bitcoin, and the city will be fueled by geothermal energy from the volcano,” MIT Technology Review’s Laurie Clarke wrote.
Many individuals do not believe that the Bitcoin City proposal is worthwhile. Bitcoin City, according to Johns Hopkins economist Steve Hanke, is “a ridiculous stunt by a political dictator,” and “Bukele is too busy constructing Bitcoin City to fight crime,” in response to El Salvador’s crime problem.
The crypto craze in the United States grew without the help of government subsidies. Despite the government’s monetary policies, old securities regulations, and complex tax rules, it was powered by companies and people.
Messari’s Teander feels that the company’s infrastructure, which includes merchant apps, payments, and e-commerce, has to be increased in order for it to continue to grow. “To be honest, we’re still a long way off, but we’re closer than you think,”
The bottom-up approaches adopted by the United States and Argentina may be one reason why everyone is talking about bitcoin Because everyone is involved, not just the government.