Please read the case, “El Salvador’s bitcoin gamble”.
Here is a summary of the key points from the case:
In June 2021, El Salvador passed a law making Bitcoin legal tender, with the goals of reducing remittance costs, expanding financial inclusion, and attracting investors.
Six months after implementation, Bitcoin has failed to gain widespread adoption among consumers and businesses. Only 14% of companies surveyed had conducted any Bitcoin transactions.
There is no evidence that adopting Bitcoin has reduced remittance costs. Services like Western Union remain cheaper than using Bitcoin.
The government’s Chivo wallet saw millions of downloads initially when $30 in Bitcoin was provided, but most users cashed out and did not continue using it.
Flaws in Chivo’s identity verification enabled identity theft. Many users reported missing funds from their wallets.
Bitcoin’s high volatility makes it risky for savings. Many vendors who accepted Bitcoin saw holdings decline in value due to falling prices.
Little progress made in attracting investors or entrepreneurs through proposed Bitcoin bonds. Concerns exist about quality of companies involved.
Bitcoin mining operations have proven costly and inefficient. Just $269 worth of Bitcoin was mined in the first few days, while spending thousands on electricity.
Overall, El Salvador’s Bitcoin experiment has faced challenges in implementation, security, technical support, and achieving its economic goals thus far. More time is needed to evaluate long-term effects.
The International Monetary Fund (IMF) has been trying to convince El Salvador to reverse its 2021 law, which has made bitcoin a legal tender. Should El Salvador comply with the IMF’s demand and stop the use of bitcoin as a legal tender?
Please see “Assignment 1 and 2: Case analysis guidelines” in Canvas and try to include as many things as possible from the guidelines.
Please cite all the sources of your information. Your analysis is expected to be about 2,000-2,500 words in length excluding tables, figures and references.
