How are those countries that oppose the hegemony of the US dollar, fight high inflation, and use Bitcoin as legal tender doing now?

Author: Yi Er Produced by: Benpao Finance
For developed countries, digital currency is a great vision in the field of science and technology, but for third world countries, digital currency is more of a financial tool to maintain purchasing power and not be deprived. Many countries even hope that it can eliminate financial barriers and provide new solutions for economic development.
When it comes to third world countries, poverty, hunger, and violence are the first words that come to mind. Digital currency, Bitcoin, and other products of the modern Internet are incompatible with third world countries, but digital currency now provides a new way for third world countries to solve their own financial difficulties.
From El Salvador becoming the first country to use Bitcoin as legal tender on June 9, 2021, to Cuba and the Central African Republic legalizing Bitcoin, many third world countries have begun to embark on the path of legalizing digital currencies. The following is a summary of the current status of third world countries that use digital currencies as legal tender.
El Salvador
If you want to find three words to describe El Salvador, you can’t miss “high crime rate, high murder rate, gangs and violence”, which is why it is called one of the most dangerous countries in the world. Before 2021, the US dollar was the only legal currency in the country. Until 2021, the Salvadoran Congress officially voted to pass the Bitcoin bill, and since then, it has become the first country in the world to use Bitcoin as legal currency.
The radical move to use Bitcoin as legal tender has drawn a lot of criticism. Ethereum co-founder Vitalik Buterin also believes that the actions of Salvadoran President Nayib Bukele are a wrong example because his approach to Bitcoin is "top-down." Bitcoin's loyal followers are mostly rich and powerful people, and this move will be more beneficial to the rich. The International Monetary Fund (IMF) has also asked El Salvador to repeal its Bitcoin law and said it may refuse to provide financial assistance to it as a result.
At the end of 2021, the country's debt accounted for 85% of its GDP, and the country's economic situation was not optimistic. However, El Salvador's GDP grew by 10.3% in the first year after adopting Bitcoin, as Bitcoin promoted the recovery of El Salvador's international tourism industry.
After Bitcoin became the national legal currency, El Salvador also proposed a series of plans, including building a Bitcoin beach, using volcanic geothermal energy to mine Bitcoin, and issuing Bitcoin bonds.
As a country with a large number of poor people, Bitcoin becoming legal tender seems to be extremely disadvantageous to the population struggling on the poverty line. After all, the Internet penetration rate in El Salvador is only 45%. But on February 19 of this year, Bitcoin Archive posted on social media that 94% of Salvadorans still intend to vote for Nayib Bukele to continue to serve as president, and the masses have not given up their support for the president because of his Bitcoin plan.
El Salvador began regulating digital securities this year, issuing Bitcoin-backed bonds, also known as volcano bonds.
On April 18, the total value of BTC held by El Salvador lost 29% compared to the cost price, but the official believes that this ratio is only a very small proportion relative to the government's fiscal budget. The huge market volatility of Bitcoin is bearable in the eyes of the Salvadoran authorities because they are betting on the future of Bitcoin.
In February of this year, after its annual visit to El Salvador, the IMF believed that the risks of Bitcoin "have not yet become a reality" in El Salvador, but its "legal risks, fiscal vulnerabilities and the largely speculative nature of the cryptocurrency market cannot be ignored", and reminded government authorities that they should reconsider plans to expand the government's exposure to Bitcoin.
Cuba
In June 2021, just a few days after El Salvador, Cuba announced that it had become the second country to use Bitcoin as legal tender. As a traditional government, Cuba did not do this to embrace advanced technology, but to cope with the US cross-border exchange sanctions. Compared with the many social factors in El Salvador, a greater part of the reason that prompted Cuba to make this decision was political.
Due to the embargo imposed by the Trump administration, Cuba needs to bypass the US dollar framework to circumvent the financial restrictions set by the United States. Coupled with the prevalence of bureaucracy and high inflation in the Cuban government, the public's trust in the government is declining, and the original legal currency, the peso, is also becoming less trustworthy. In the eyes of many Cubans, Bitcoin is more trustworthy than the peso. Therefore, mobile Internet began to spread in Cuba in a timely manner, and many Cubans began to use Bitcoin instead.
In the context of economic isolation, digital currencies have provided Cuba with a source of funds and have begun to be used on a larger scale in Cuba. In September 2021, the bill issued by the Central Bank of Cuba to recognize cryptocurrencies such as Bitcoin (BTC) came into effect, and cryptocurrencies have now become a legal payment method for commercial transactions in Cuba.
One year after cryptocurrency became legal tender, a report released by US media NBC News pointed out that due to sanctions, Cubans cannot use PayPal, Revolut, Zelle and many other international credit or debit cards. More than 100,000 Cubans are using Bitcoin and other cryptocurrencies to cope with US sanctions.
The US economic sanctions that began in 1962 have lasted for 60 years. Today, the Biden administration has not relaxed its economic blockade on Cuba, and Cuba can only find its own economic way out. Media reports say that Russia and Cuba, both of which are subject to US sanctions, are studying alternatives for cross-border payments, and cryptocurrencies provide Cuba with an option to circumvent the financial restrictions imposed.
Central African Republic
On April 21, 2022, the National Assembly of the Central African Republic unanimously passed a bill to make Bitcoin a legal tender, becoming the first African country in the world to adopt Bitcoin as its official currency. After announcing the adoption of Bitcoin as legal tender, it launched Sango Coin, becoming the first African country to create a national cryptocurrency.
The Central African Republic is a small country in Africa with a population of slightly over 5 million. In addition to its turbulent political situation, it is also considered one of the poorest countries in the world. Since it was a French colony in the early days, it has always used the Central African franc as its legal currency, but as France began to adopt the euro, the value of the Central African franc is declining. Therefore, the government has turned its attention to cryptocurrencies and is ready to integrate them into the national economy.
The Central African Republic's economy is mainly based on agriculture, with a weak industrial base, and more than 80% of industrial products are imported. Due to political turmoil and constant war, many production operations cannot proceed normally, and the economic situation is deteriorating.
As a small, poor African country, Internet coverage is only 11%. Moreover, in the Central African Republic, only about 14% of people have access to electricity and less than half have mobile phones.
Because of many realities, the Central African Republic's adoption of cryptocurrency has attracted the attention of many experts in the crypto field and has been warned by the International Monetary Fund. However, the Central African Republic still insists on incorporating cryptocurrency into the national economy. On July 25, 2022, it launched the Sango platform based on the Bitcoin sidechain and started the pre-sale of Sango tokens. It plans to list Sango Coin on cryptocurrency exchanges in the next few weeks.
At present, the popularity of Bitcoin in the Central African Republic faces difficulties. People are still accustomed to using currency to buy goods, not Bitcoin. The current network infrastructure is not feasible, and smartphones are not yet popular.
Venezuela
On February 20, 2018, Venezuela officially launched the pre-sale of the Petro, the first legal digital currency issued by a country in human history. The Petro is expected to be officially launched and circulated in September 2018, which means that Venezuela will use two legal currencies for transactions at the same time - Bolivar (legal currency) and Petro.
The Petro is the official digital currency directly linked to the country's oil, natural gas, gold and diamond reserves. According to the Petro white paper, each "Petro" is equivalent to one barrel of oil, and the total circulation is 100 million.
After the issuance of the Petro, the Maduro government has been actively promoting the Petro. Citizens can use the Petro to buy houses, and Petro counters have been opened in major banks to promote the transfer and circulation of the Petro. In addition, the Venezuelan Central Bank will update the exchange rate of the Petro against other countries' legal currencies in real time to increase the international circulation of the Petro. The Venezuelan government has also begun to pay pensions or relief to all retirees through the Petro. President Maduro also stated that water, electricity and taxes in Venezuela will be paid through the Petro in the future. The government not only promotes the use of the Petro in international payment scenarios, but also forcibly integrates the Petro into the daily lives of residents.
In 2019, Venezuela announced the severance of diplomatic ties with the United States, and the United States continued to impose financial controls and oil sanctions on it. Since then, the Petro has become the best way for Venezuelans to transfer funds to circumvent US sanctions.
Tonga, a small Pacific country
On January 13, 2022, Lord Fusitu’a, a former member of parliament in the Pacific island nation of Tonga, shared the specific approach to adopting Bitcoin as legal tender. Fusitu’a said that this move would allow more than 100,000 Tongans to join the Bitcoin network, while Tonga’s total population is only 120,000. Moreover, the bill was modeled after the bill in El Salvador.
Fusitu’a told foreign media that an important reason for proposing Bitcoin as legal tender is that “households in developing countries lose so much much-needed income from middlemen when sending money home.” “About 40% of Tonga’s national economy is based on remittances sent back to their home country by nearly 300,000 overseas workers. They send money back to the island’s population of about 120,000. Tonga has more than twice its population as expatriates living overseas, so remittances are vital to the national economy.”
It is reported that Tonga may make Bitcoin a legal tender in the second quarter of 2023 and start Bitcoin mining in the third quarter.
 Summarize
Under the global hegemony of the US dollar, the currencies of small countries can only become vassals. Any country in a money or currency crisis will see digital currency as a way out. American economist McKinnon once proposed the theory of "the original sin of small country currencies" - the result of small country currencies taking measures alone to counter the US dollar is tantamount to "suicide". Whether a small country's current account is a deficit or a surplus, it will eventually be detrimental to its own economy. Only by maintaining a balance of payments on the current account and maintaining a stable exchange rate with the currencies of large countries can losses be avoided.
For big countries, digital currency is more of an investable asset, while for those poor third world countries, digital currency is a truly circulating currency and one of the few options to get rid of the economic blockade under the hegemony of the US dollar. In the future, more third world countries will move towards the path of digital currency legal tender, such as Argentina, which is facing high inflation, and Paraguay, the smallest country in Latin America. Digital currency also provides new ideas for these countries to seek an independent financial and monetary system.