Costa Ricans Need Crypto Alternatives to US Dollar-Backed Colonia
2 min readCosta Rica is pretty laid-back when it comes to crypto, especially its laws.
Article 166 of Costa Rica’s Labor Code, for example, allows for employees’ salaries — if they exceed the amount covering the minimum wage — to be paid using forms of compensation including cryptocurrency.
Although you can pay people in crypto, and respected companies like Coinbase serve the country, the adoption here lags behind that of many countries. Places like Venezuela and Argentina, where currency inflation has been a disaster, have adopted crypto in greater numbers than Costa Rica, which has a currency pegged to the United States dollar.
Costa Rica has the third-highest public debt in Latin America
But it is a precarious time for the US. Over the last few years, I’ve seen 10% inflation on our currency versus the US dollar. As in many parts of the world, if not most, the pandemic response has only exacerbated unemployment. Half of Costa Rican workers are unemployed or underemployed.
That’s tens of thousands more people than in 2019. Costa Rica has the third-highest public debt in Latin America, which is unsustainable. Costa Rica owes 66.2% of its gross domestic product to outside debtors. The country has to turn to outside financial institutions for loans.
In 2020, certain experts expected interest payments to reach 38% of central government revenues, or 21.4% of general government revenues.
We’re seeing debt crises starting around the globe, where countries can’t fulfill their debt obligations. We will see a collapse of fiat currencies. Central banks can only keep adding liquidity to the system for so long. For that reason, we see many nations working on central bank digital currencies. The same will be true of Costa Rica’s central bank.
Adopting crypto in a more meaningful way
One day, the Colonia will be a hot potato. People will get to the point where they touch it, get burnt, and then quickly try to pass it on. For now, people are unaware of how much they need a life raft like crypto.
Thankfully, we are quickly getting to a point where, with a smartphone in hand, Costa Ricans can hold stock in, say, Tesla. Bitcoin (BTC) and ether (ETH) could serve as not just money, but also as the entire financial sector from loans to the securitization of potential collateral.
The government might instead consider to adopt crypto in a more meaningful way than central bank digital currencies, which really aren’t at all decentralized. For instance, the Costa Rican government might adopt litecoin (LTC).
They could mine it. Or perhaps they could participate in ether and become a validator. Costa Rica could then trust the code, and not other countries. If the government allows, Costa Ricans will have alternatives. Hopefully, this will make it easier for people here to create more wealth.
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