The founders and staff of a Swiss VC firm that invests in disruptive technologies, LIAN Group, have just returned from a week in El Salvador at the request of the Government and Central Bank to advise on Bitcoin as a national currency.
Partners Fiorenzo Manganiello & Nessim Sariel-Gaon, as well as Josue A. Lopez, met with El Salvador’s Vice President Felix Ulloa and Juan Pablo Durán Escobar, the chairman of Bandesal, the national development bank of El Salvador.
Lopez told HackerNoon this story exclusively.
How did you get the opportunity to advise the government of El Salvador? Are you impressed by their implementation of rolling out Bitcoin as a second native currency?
As a Salvadoran, since a very early age, I was committed to dedicating my career to helping El Salvador in any way I can. When we heard the news that El Salvador was taking a step into the global stage with the introduction of Bitcoin as El Salvador’s third legal currency, we discussed with our partners at LIAN and our team to evaluate ways in which we could be of service.
I’m impressed to see El Salvador taking such an innovative and futuristic step that is bound to lead the charge for the decentralization of legal tender. Seeing small countries make such bold decisions is truly a representation of the power innovation has, and hopefully through this process, the final benefit will be reaped by the amazing people of El Salvador, and other countries that collaborate with it or decide to make Bitcoin legal tender in their jurisdictions.
Does the government have the resources and the expertise to execute the widespread acceptance of Bitcoin as a currency? What are their biggest hurdles?
El Salvador is a small country with a developing economy and society. Currently, one of the main challenges in El Salvador, as in most countries around the world, is the knowledge of what Bitcoin is and how the Blockchain works.
However, the government of El Salvador has displayed the willingness to receive aid and advisement from global blockchain experts, both for the legislative, social and economic application of the cryptocurrency as well as for the production of Bitcoin in the country.
One of the biggest challenges is the accessibility to cheap and renewable energy, at a large scale. President Bukele has come up with a great solution for this challenge, using Geothermic energy to fuel the Bitcoin mining process in the country.
El Salvador does not have a first-world communications infrastructure and its internet penetration is known to be amongst the worst in South America. Will this not hamper President Bukele’s efforts?
This is definitely a challenge that has been discussed widely within the government and with private individuals.
The sitting Salvadoran administration has come up with innovative solutions to this issue, such as the use of satellites to improve internet connectivity, creating a government wallet that is free of charge and is in partnership with cellular data providers and creating a network of physical Crypto-ATM’s throughout the country so the cryptocurrency is more accessible.
How will this help the unbanked and poor people of El Salvador?
We expect a wave of Foreign Direct Investment to be injected into the country as Bitcoin becomes more popular. This will give the government the resources to expand their public infrastructure efforts, such as the development of better roads, hospitals, schools, specialized universities, and much more.
El Salvador is a country with great income inequality, a result of years of a two-party system that didn’t benefit the development of the people. Through this new effort, poor people that didn’t have access to financial services will be offered the chance to grow, both educationally and financially. With the proper guidance, El Salvador is on track to decrease the income inequality gap.
How does President Bukele aim to gain international support from financial institutions and international financial lawmakers? Which will be key to his project becoming a success?
President Bukele, along with his administration, is working on several initiatives that will surely attract global financial institutions and international financial lawmakers. From the use of fiscal incentives, public-private joint ventures, and dedicated legal systems to treat the cryptocurrency, El Salvador will become a hub for Bitcoin and other cryptocurrency trade.
There is definitely a global positive sentiment towards this decision and the availability of big players in the sector to aid El Salvador in this innovative transition.
As VCs, does this initiative now make doing business in El Salvador more attractive? Will this initiative make the country more attractive for investment?
Due to the nature of Bitcoin, it makes for the international transfer of money a simpler process, without too many intermediaries and government interference. As a VC, this opens a world of possibilities that we’re working to develop with El Salvador. The attractiveness of investing in El Salvador is already there, and exponentially growing.
As they begin to introduce more investment incentives, companies around the world will being to look at El Salvador and realize the potential the country has. After all, El Salvador is a country filled with many resources, hardworking and kind people, and a government that is willing to work for its people and attract investment.
Given your expertise in mining and agriculture, does El Salvador’s landscape make it perfect for mining, given that their volcanoes offer an ideal and renewable thermal power source?
El Salvador’s location, at the center of the American continent, offers great potential for mining operations in the country.
One of the great challenges was the access to cheap and renewable energy. Given the country’s access to thermal resources from 23 volcanoes, it is no longer a question of if, and more a question of when.
Geothermic energy is an interesting way to fuel the Bitcoin mining process as it offers cheap, 24/7 and renewable energy. This fact, paired up with the willingness of El Salvador’s government and its people to incentivize mining in the area make it a very competitive country to mine cryptocurrencies in.
In your opinion, do you believe that countries with their own plans for exploring CBDC’s are watching El Salvador intently? Will this have a bearing on their government’s future decisions on whether to speed up, or shelve their own plans?
The decision to make Bitcoin legal tender in El Salvador was the government’s decision, but it’s a global effort.
The imminent success of the use of cryptocurrency in the Central American nation will dictate the future for other countries that are hesitant on adopting Bitcoin as legal tender.
We are already seeing efforts in different parts of the world to make Bitcoin legal tender and begin the official adoption process of the cryptocurrency. Eyes are now on El Salvador as it launches itself into the global stage. This opens El Salvador to tremendous amounts of resources, both knowledge and financial resources, to make sure this endeavor is a success.