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Latin-American Countries Should Ditch the Dollar for Bitcoin

By: Yaël Ossowski - @YaelOss - Feb 25, 2014, 9:54 am

EspañolIn Ukraine, the citizen uprising is beyond bloody. In Venezuela, it’s a full blown crisis.

All across the world, people are rising up against their governments and demanding a change to the status quo.

Latin American states are beginning to turn against their traditional governmental power structures.
Latin Americans are beginning to turn against their traditional governmental power structures.

In several Latin-American countries, the anger against government is just as strong; citizens are frustrated with corrupt politicians, deteriorating security, and uncertain economic futures for the majority of youth.

For Ecuador, that translated most recently into a huge wave of opposition support in the local elections, loosening Rafael Correa’s grip on power. In El Salvador, the ongoing creep of socialist power and economic neglect has exposed the nation’s mounting fiscal problems, and similarly put the nation’s young people on edge.

All across Latin America, young people are looking for more ways to be free and independent, and they have it within their power to do so.

If they want a chance at empowering themselves at the expense of politicians, they should look at a radical solution that would overturn years of disastrous policies: ditch the US dollar and instead adopt bitcoin as their official currency.

At present, there are 10 sovereign nations that use the US dollar as their main currency — a practice known as “dollarization.” Three of these countries are in Latin America — Ecuador, El Salvador, and Panama — and each have their own reasons for using the currency of the world’s most powerful country.

Panama has been stuck with the US dollar since its birth as a nation in 1903, owing to the United States’ heavy involvement in their revolution and the subsequent US construction of the Panama Canal. Ecuador and El Salvador have had the dollar as their own for almost 15 years, ushered in because of monetary crises and falling confidence in previous currencies. They adopted US dollar circulation to avoid the monetary problems of the past.

In short, these countries submitted their monetary sovereignty to the United States in order to keep inflation in check, keep stable prices, and grow their economies.

Latin American countries adopting Bitcoin would invite huge amounts of price stability and technological innovation.
Latin-American countries adopting Bitcoin would invite huge amounts of price stability and technological innovation.

With the promise offered by decentralized crypto-currencies, these nations have it within their power to regain their monetary integrity. They could do something radical and ahead of the curve that would certainly boost confidence in their flagging economies.

By adopting bitcoin, Ecuador, Panama, and El Salvador would turn over monetary control not to a political entity such as the United States, but to the complex algorithm which protects users from inflation and monetary shocks.

It would completely remove political considerations from the question of currency, at last upholding the separation of money and state.

Rather than being subject to the whims of the Federal Reserve, a central bank governed by US financial institutions with the US public in mind, bitcoin offers ultimate credibility and confidence for consumers and merchants in Latin-American countries.

Money would be incredibly fungible, encrypted, and forever safe from the meddling of well-intentioned government bureaucrats.

It would also mean that citizens of Ecuador, El Salvador, and Panama could expect massive levels of innovation and regained economic confidence, thanks in part to bitcoin’s relative simplicity and the reduced need for government regulators and private middlemen to charge exorbitant fees. Entrepreneurs would be emboldened to take on new projects and find new ways to bring goods and services to millions of people previously unable to participate in the market.

It would empower the most disadvantaged in society, giving them access to technology that would incrementally increase their own skills and attractiveness to future employers.

Such an adoption, however, wouldn’t be without its critics.

One criticism which would inevitably arise in this scenario is that Bitcoin would be declared “too volatile” to be adopted by a entire nation, which is true in bitcoin’s young history.

However, in the event of a nation state adopting Bitcoin as an official currency, this would be a huge vote of confidence for the digital currency, likely cementing and stabilizing the price in the face of mass adoption. Ditching the US dollar for bitcoin would at last give some kind of assurance to the entrepreneurs and innovators — the early adopters — who’ve risked running afoul of laws that aim to discredit alternative currencies.

As this point, the majority of bitcoin transactions take place on dubious legal grounds. State adoption would legitimize such a venture, bring it out into the open, and more than likely lead to more, not less, stable prices. It would also inspire business owners, creators, artists, and thinkers to imagine and live beyond the stagnant nation state systems that have limited their abilities to grow and help their fellow man.

Were Ecuador, El Salvador, and Panama to consider ditching the US dollar for bitcoin, they’d not only be doing their populations a huge service, they’d lend a huge amount of credibility to people considering alternatives to all types of state-controlled entities and services, including education, health, and even the military.

By adopting bitcoin, these Latin-American countries would take a bold step into the 21st century, making Latin America a freer, richer, and more prosperous area than ever before. They have it within their power.

Yaël Ossowski Yaël Ossowski

Yaël Ossowski is a journalist, informational entrepreneur, and Senior Development Officer for Students For Liberty. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria. Follow @YaelOss and on his website Yael.ca. Read his featured PanAm Post column, "Question the Narrative."