Bitcoin is undergoing the biggest test in its 12-year history as El Salvador becomes the first country to adopt it as legal tender on Tuesday.
Both enthusiasts and detractors of cryptocurrencies will be monitoring the experiment to see if a significant number of people want to transact with Bitcoin when it circulates alongside the US dollar, and whether it brings any benefits to the Central American nation.
The country bought 400 Bitcoins ahead of the rollout, with a market value of about $20 million at current prices. It plans to buy “a lot more” of them, President Nayib Bukele said on Twitter, after buying the first batch of 200 Bitcoins.
If the experiment is a success, other countries may follow El Salvador’s lead. Its adoption will get an initial boost from the government’s Bitcoin wallet Chivo, which comes pre-loaded with $30 worth of the currency for users who register with a Salvadoran national ID number.
Businesses will be required to accept Bitcoin in exchange for goods and services, and the government will accept it for tax payments. The plan is the brainchild of El Salvador’s 40-year old president, who says it will draw more people into the financial system and make it cheaper to send remittances.
“This is brave new world stuff,” said Garrick Hileman, head of research at the Miami-based Blockchain.com. “We are in unchartered waters with this launch, but I’m glad to see this experiment happen overall, and I think we’ll learn a lot from it.”
Mr Bukele’s administration has installed 200 Bitcoin ATMs around the country that can be used to exchange the cryptocurrency for US dollars. The Finance Ministry created a $150m fund at state-run bank Banco de Desarrollo de la Republica de El Salvador, Bandesal, to back the transactions.
The dollar will remain the national currency for public accounting purposes and merchants who are technologically unable to receive the digital currency will be exempt from the law, the government said.
El Salvador’s dollarised economy is heavily reliant on remittances sent home by migrants overseas, which totalled $6 billion last year and account for roughly a fifth of the country's gross domestic product. Mr Bukele said Bitcoin could save Salvadorans $400m a year in fees for these transactions.
While Mr Bukele himself enjoys approval ratings of more than 80 per cent, a poll last week by El Salvador’s Universidad Centroamericana Jose Simeon Canas found his Bitcoin law is widely unpopular. Two-thirds of respondents said the law should be repealed, while more than 70 per cent said they prefer to use US dollars instead.
We are in unchartered waters with this launch, but I’m glad to see this experiment happen overall, and I think we’ll learn a lot from it
Garrick Hileman,
head of research, Blockchain.com
The International Monetary Fund has highlighted the risks of using Bitcoin, which lost nearly half its value from April to May, and the World Bank declined a request from El Salvador to help the government adopt it, citing environmental and transparency drawbacks. The Bitcoin news also helped trigger a selloff of El Salvador’s dollar bonds, although they have since pared losses.
“Crypto is sexy but untested and complicated especially for a country like El Salvador,” Nathalie Marshik, managing director at Stifel Nicolaus, said. “It’s extremely risky, and there is the question of, is the Bandesal fund big enough? The regulations look like the law, put together really quickly. It’s a big question mark.”
While the Bahamas launched its own central bank-backed digital currency this year, the Sand Dollar, and Venezuela has its own e-money called the Petro, these are very different from a decentralised cryptocurrency such as Bitcoin, whose users value its independence from governments and central banks.
Other governments in the region will be watching closely. Last month, Cuba moved to legalise cryptocurrency already being used on the island, while politicians in other countries such as Panama and Uruguay have proposed similar legislation.
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THE SPECS
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RESULT
Aston Villa 1
Samatta (41')
Manchester City 2
Aguero (20')
Rodri (30')
Tom Fletcher on 'soft power'
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
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Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster who has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
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Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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UAE currency: the story behind the money in your pockets
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
What it means to be a conservationist
Who is Enric Sala?
Enric Sala is an expert on marine conservation and is currently the National Geographic Society's Explorer-in-Residence. His love of the sea started with his childhood in Spain, inspired by the example of the legendary diver Jacques Cousteau. He has been a university professor of Oceanography in the US, as well as working at the Spanish National Council for Scientific Research and is a member of the World Economic Forum’s Global Future Council on Biodiversity and the Bio-Economy. He has dedicated his life to protecting life in the oceans. Enric describes himself as a flexitarian who only eats meat occasionally.
What is biodiversity?
According to the United Nations Environment Programme, all life on earth – including in its forests and oceans – forms a “rich tapestry of interconnecting and interdependent forces”. Biodiversity on earth today is the product of four billion years of evolution and consists of many millions of distinct biological species. The term ‘biodiversity’ is relatively new, popularised since the 1980s and coinciding with an understanding of the growing threats to the natural world including habitat loss, pollution and climate change. The loss of biodiversity itself is dangerous because it contributes to clean, consistent water flows, food security, protection from floods and storms and a stable climate. The natural world can be an ally in combating global climate change but to do so it must be protected. Nations are working to achieve this, including setting targets to be reached by 2020 for the protection of the natural state of 17 per cent of the land and 10 per cent of the oceans. However, these are well short of what is needed, according to experts, with half the land needed to be in a natural state to help avert disaster.
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Hive Mind
four stars
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
HIJRA
Starring: Lamar Faden, Khairiah Nathmy, Nawaf Al-Dhufairy
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Rating: 3/5
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HAEMOGLOBIN DISORDERS EXPLAINED
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
MATCH INFO
Juventus 1 (Dybala 45')
Lazio 3 (Alberto 16', Lulic 73', Cataldi 90 4')
Red card: Rodrigo Bentancur (Juventus)
'Unrivaled: Why America Will Remain the World’s Sole Superpower'
Michael Beckley, Cornell Press
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
UAE currency: the story behind the money in your pockets
