Billionaire investor and Bitcoin evangelist Tim Draper visited the Central Bank of Sri Lanka to promote Bitcoin as a solution to combat corruption. Despite Draper’s efforts, Governor Nandalal Weerasinghe showed a cold reception and rejected the idea of adopting Bitcoin.
A Cold Shoulder from Sri Lanka’s Central Bank
Draper, dressed in a Bitcoin-themed tie, stated to Weerasinghe, “I come to the Central Bank with decentralized currency.” To which the Governor responded, “We don’t accept.” The Governor further added that the adoption of 100% Bitcoin would not be a reality in Sri Lanka, stating that the country doesn’t want to worsen the crisis by introducing the cryptocurrency.
Draper’s Arguments for Bitcoin Adoption
Draper argued that with the adoption of Bitcoin, a country known for corruption would have the ability to keep a perfect record. However, Weerasinghe emphasized that having its own currency was crucial for Sri Lanka’s monetary policy independence, and other technologies could serve the purpose of distributing financial services. Draper also made the case for Bitcoin adoption during his meeting with Sri Lanka’s President Ranil Wickremesinghe.
Sri Lanka’s Current Crisis and Bitcoin
Sri Lanka is currently facing a major economic and political crisis, marked by fuel and food shortages, mass protests, and default on foreign loans. Systemic corruption is believed to be one of the major reasons behind the country’s descent into chaos, but those ruling the country today seem to be opposed to the idea of introducing Bitcoin as a possible solution.
Draper’s Bitcoin Evangelism
In 2014, Draper made a significant investment in Bitcoin, buying 30,000 BTC, worth $19 million, seized from the dark web drug marketplace Silk Road in an auction held by the US Marshals Service. That same year, he predicted that the price of Bitcoin would reach $10,000 in three years, which came true in 2017 when Bitcoin surpassed $20,000. However, not all of Draper’s predictions have come to fruition. In 2018, he argued that Bitcoin would reach $250,000 by 2022, which he later extended to mid-2023.
In the case of El Salvador, the adoption of Bitcoin as a legal tender was a bold move that sparked a debate about the future of money and financial systems. While time will tell whether this move was a wise one, it has certainly put the spotlight on Bitcoin and the potential benefits and risks of its adoption. Regardless of where you stand on the issue, one thing is clear – the rise of Bitcoin has sparked a conversation about the future of money that is likely to continue for many years to come.
In 2021, El Salvador became the first country to make Bitcoin a legal tender. The country’s President Nayib Bukele announced the plan during the 2021 Bitcoin Conference in Miami, with the goal of making it easier for citizens living abroad to send remittances back home.
Bitcoin Law Adopted
The Bitcoin Law was adopted on June 9, 2021, with 62 out of 84 deputies voting in favor. The government also set aside $150 million to support the measure and offered $30 in BTC to individuals who signed up for an electronic wallet, “Chivo.”
Lack of Adoption by Citizens
A research study by the University of Central America found that 77% of El Salvadorans believe the adoption of Bitcoin as a legal tender was a failure. 75.6% of the population revealed they haven’t used cryptocurrencies this year, despite the government’s efforts to popularize the asset class. Additionally, 77% of citizens believe the government should stop using public funds to accumulate BTC.
Remittances and Bitcoin
A report from the Salvadoran Central Bank in September 2022 showed that only 2% of remittances involved digital currencies, despite Bitcoin’s initial promise of making it easier to send money abroad.
The Future of Bitcoin in El Salvador
Despite the negative reception of the Bitcoin Law, President Bukele remains confident and is dedicating time and resources towards making the country a global crypto hub. Despite the cryptocurrency’s volatile nature and its current price 70% lower than its all-time high, the government remains defiant in their efforts.
A Warning from the UN
The United Nations Conference on Trade and Development (UNCTAD) warns developing nations about the risks associated with unregulated crypto in its recently published policy brief, “All that glitters is not gold.” UNCTAD suggests mandatory registration of crypto wallets and a ban on crypto advertisements in developing nations. “This is not about approving or disapproving [of crypto] but pointing out that there are social risks and costs associated with cryptocurrency,” says Penelope Hawkins, an economist at UNCTAD.
Cryptocurrencies, the brief warns, could harm financial stability, enable illicit activity, limit authorities’ control over capital, and threaten monetary sovereignty. To “make the use of cryptocurrencies less attractive,” the UNCTAD recommends taxes on crypto transactions, mandatory registration of digital wallets and exchanges, and a ban on financial institutions holding digital assets and offering crypto services. The conference also calls for restrictions on crypto advertisements in public spaces and on social media platforms.
Rohan Grey, a law professor, and UN consultant highlight the documented harm to consumers caused by the lack of crypto regulation, allowing fraud and scams to flourish. “The ecosystem is not fully ripe and mature,” Grey says. “Allowing [the industry] to aggressively market itself would be like having a new kind of drug that hasn’t even gone through the FDA process trumpeting itself as solving cancer.”
Down But Not Out
Despite Tim Draper’s efforts to promote Bitcoin as a solution to corruption, his efforts were rejected in Sri Lanka. In contrast, El Salvador became the first country to make Bitcoin a legal tender, but its adoption has been met with skepticism by its citizens. The United Nations has issued a warning about the risks associated with unregulated cryptocurrencies in developing nations and has recommended various measures to mitigate these risks.
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