Coinbase, the largest cryptocurrency exchange in the United States, went public on April 14, 2021, in a direct listing that valued the company at over $85 billion. The debut of Coinbase on the Nasdaq was seen as a milestone for the crypto industry, which has grown rapidly in the past decade despite regulatory hurdles and market volatility.
Coinbase’s IPO coincided with a surge in the price of Bitcoin, which reached a record high of nearly $65,000 on April 14. Bitcoin, the first and most popular cryptocurrency, has gained mainstream acceptance in recent years, as more institutional investors, corporations and celebrities have embraced it as a store of value and a hedge against inflation.
One of the most notable developments in the crypto space was the decision by El Salvador to adopt Bitcoin as legal tender, becoming the first country to do so on September 7, 2021. The move was spearheaded by President Nayib Bukele, a young and popular leader who claimed that Bitcoin would help boost financial inclusion, attract foreign investment and reduce remittance costs for Salvadorans living abroad.
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However, El Salvador’s Bitcoin experiment has faced many challenges and criticisms, both internally and externally. The International Monetary Fund (IMF), which provided an emergency loan to El Salvador last year and is now negotiating another round of lending, has warned that using Bitcoin as legal tender raises a number of economic, financial and legal issues. The World Bank and the Inter-American Development Bank have also declined to assist El Salvador with the technical implementation of the Bitcoin law.
Many Salvadorans have also expressed skepticism and opposition to the Bitcoin law, citing concerns about the volatility of the cryptocurrency, the security of the digital wallets, and the lack of education and information about how to use it. According to a survey by the Central American University (UCA), 67.9% of Salvadorans disagreed with the decision to adopt Bitcoin as legal tender, and 80% had little or no confidence in using it.
The launch of the Bitcoin law was marred by technical glitches, protests and a sharp drop in the price of Bitcoin, which plunged nearly 10% on September 7. The government had to temporarily shut down its official digital wallet app, called Chivo, which was supposed to allow users to receive $30 worth of Bitcoin for free. Many users reported difficulties in downloading, registering and transferring money through the app.
Despite these setbacks, President Bukele has remained defiant and optimistic about his Bitcoin plan. He has used his social media presence to announce several purchases of Bitcoin by his government, totaling 1,120 coins as of December 20, 2021. He has also claimed that more than 2.1 million Salvadorans are using the Chivo app, and that Bitcoin transactions have saved millions of dollars in remittance fees.
The impact of El Salvador’s Bitcoin experiment on its economy and society is still unclear and uncertain. Some analysts have argued that it could pave the way for more innovation and inclusion in the crypto sector, while others have warned that it could expose the country to more instability and risk. The experiment is also being closely watched by other countries that are considering adopting or regulating cryptocurrencies, such as Panama, Ukraine and Nigeria.
Coinbase’s IPO and El Salvador’s adoption of Bitcoin as legal tender are two significant events that reflect the growing influence and potential of cryptocurrencies in the global financial system. They also illustrate the opportunities and challenges that come with embracing such a disruptive and evolving technology. As Coinbase CEO Brian Armstrong said in his letter to shareholders on April 14: “Crypto has the potential to be as big as the internet itself.”
