Issue 107: Can Governments Work with Crypto?
Welcome to Backstory, a weekly newsletter turning global technology shifts into a three-minute read. This week, we’re thinking about El Salvador and Bitcoin – Mary Ames, Director of Strategy
THE BIG TAKE
Can Governments Work with Crypto?
Remember when El Salvador adopted Bitcoin as a legal tender? At the time (September 7, 2021, to be exact), it was heralded as a historic decision by one of Central America’s poorest countries. The decision was branded as a clever way for El Salvador to break from the international monetary system that some critics have claimed hurt the country’s economy. Other nations across emerging markets watched the move closely and began planning their shift to Bitcoin. But that was then. A year later, the decision isn’t viewed as favorable.
Depressed assets: The price of a Bitcoin when El Salvador adopted the cryptocurrency as legal tender was close to $47,000. Today the price is hovering around $20,000. The volatility of the asset led many analysts to question why the government would make such a risky move. Their concern has been born out. Because the government invested so much capital in acquiring Bitcoins, the downturn in crypto prices has hit the country hard. Interestingly, most Salvadorans haven’t poured large amounts of money into Bitcoin, saving many from the recent bear market.
Too soon? Despite the pain now, one has to credit the boldness of El Salvador’s decision. Cryptocurrency and blockchain technology are critical building blocks for the future knowledge economy that will define the global economy. Countries like the UAE have invested handsomely in blockchain technology while (correctly) avoiding making crypto assets legal tender. Other countries are debating how to create their government-backed digital currencies. It looks like El Salvador was just a bit early to this transition and is paying the price in the short term. In 20 years, however, we might look back on this decision and admire its brilliance. There is no getting around the future role that blockchain technology will play in the global economy.
QUOTE OF THE WEEK
“Concentrate all your thoughts upon the work in hand. The sun's rays do not burn until brought to a focus.”
– Alexander Graham Bell
CHART OF THE WEEK
Welcome to our new chart of the week section!
In our world awash with data, charts are a great way of cutting through the noise. We will start with one or two charts focused on economics and technology in the Middle East. This week, we are looking at tourism numbers in the Gulf ahead of the World Cup in Qatar later this year. The UAE is outpacing other countries by a healthy margin.
OUR VIEWS THIS WEEK
A new standard? Bitcoin is a legal tender in El Salvador. The Latin American nation is realizing the cypherpunks’ dream by outsourcing the country’s monetary policy to a decentralized network of computers. But what will the move mean for the rest of the emerging world? In this piece from the Xische archive, we took a deep dive into this historic development.
AI is a public good: Given the power and potential of artificial intelligence (AI) to change the planet for the better, shouldn’t governments have a more significant role in safeguarding the technology? That’s the simple but complex question we investigated in this archived piece in Xische Reports. The development and use of AI technology are crucial for society, and it can’t be left to big tech giants alone. Moreover, the US government (and others like it) are missing an excellent opportunity to use AI for good across the public sector.
SPOTTED ELSEWHERE
Better plastics. There is too much plastic in the world. We all know this to be a fact. So where are the creative solutions to reuse plastics and find a solution to this problem? They are out there but seem to fly under the radar. Consider this nifty solution: a team from Michigan State University has found a way to make gummy bears from recycled bioplastic used in wind turbine blades. The nucleus of this idea is anyone’s guess but the story is a fantastic example of how we need to think far outside the box to combat the world’s overreliance on plastics.
Google search and thinking. We spend a great deal of time thinking about artificial intelligence (AI) and how it will shape the future. But the reality is that AI is shaping the present in many small ways. One profound example is the Google search algorithms and how they mold what we see on the internet. Google announced last month that it will be updating its search with more emphasis on content depth. It’s an interesting update to read considering how much direct impact it will have on the thought process of billions around the world.
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