Nayib Bukele, President of El Salvador pushed his country to become the first in the world to accept Bitcoin as legal tender. This has sparked concerns over El Salvador’s programmes associated with IMF, one of the two Bretton Woods institutions. Adoption of Bitcoin can lead to friction between the nation and IMF. On Saturday, Bukele said that he will send a Bitcoin bill to the Congress in coming days hinting at the strong potential in helping Salvadorians to stay abroad and send remittances home. Adoption of Bitcoin by the Central American country can complicate matters as it looks forward to seek a financial help of more than USD 1 billion from the IMF. Additionally, the country has soured its relationship with Washington by ousting five Supreme Court judges and the highest prosecutor. The influence of Washington on IMF and its effort to regulate Bitcoin, or at least its use, is known to all who have not been living under rocks. Bitcoin is one of the cryptocurrencies that work in the form of a decentralised ledger. Problem with Bitcoin is that it cannot be regulated by central banks on whom IMF has a certain amount of say.

El Salvador’s has a dollarised economy. It relies heavily on money sent back from expatriate workers. World Bank data showed that remittances to the country made up nearly $6 billion or around a fifth of GDP in 2019, one of the highest ratios in the world.

Also Read: Marvels of Elon Musk

A portfolio manager in Vontobel Asset Management, Carlos de Sousa said, “Cryptocurrencies are overall a very easy way to avoid taxation and a very easy way to simply avoid the authorities because it is a completely decentralised system, you can do money laundering, you can do tax avoidance and so on.” He commented that Bukele might be shooting his own foot by boosting a currency which allows tax evasion. Carlos further added that it remained to be seen what the IMF thought of Bukele’s foray.

Meanwhile, enthusiasts of Bitcoin are in a dreadful conundrum. Price of Bitcoin has tumbled by 47% since its mid-April high. Another concerning factor for the crypto fans is that China is now curtailing mining and trading of Bitcoin. It is worthwhile to note that China is the source for upto 75% of the world’s supply of Bitcoin. Many also doubt its potential when a few cryptic tweets by Technocrat Elon Musk can send its share-price wobbling down.

Many opine that other investments require even greater leaps of faith than Bitcoin, where one can do a lot worse than they may in the Cryptocurrency.

Bitcoin is a digital token with a finite supply. It has been around for 14 years.  In the traditional world of stocks and bonds, one can be hard pressed to find assets that have such investor enthusiasm and such a clear story to sell, as Bitcoin.

An example can help illustrate this aspect. QuantumScape Corp, a $12.3 billion market cap EV battery maker had gone public last November by a reverse merger with a SPAC. It counts Volkswagen AG and Qatar Investment Authority among its major shareholders. Despite this, its stocks plummeted worse that Bitcoin’s losing around two-thirds of its value this year. One of the reasons attributed for this loss in value was the secretive approach of the battery maker by keeping the name of their scientists secret, which may not have been perceived well in the market.

Also Read: You can now buy Tesla car with bitcoin

A clear distinctive feature of Bitcoin is its finite supply, which can never be said about stocks. Shares can be launched by companies for various reasons.

EVs are changing the energy and transportation market of the world. Countries like El Salvador are going to take loans and assistance from IMF. But there is one thing which will remain immune to all such developments. It is the story of Bitcoin or cryptos! Cryptocurrencies like Bitcoin have a beautifully simple story to sell, which speaks just about supply and demand. This can help them go a long way.