Bitcoin also has the backing of a government - El Salvador.
I would rather argue though that even government backed currencies are fully dependant on trust, not government usage of it. Just check out any government currency hyperinflation event.
91% of El Salvadoreans prefer to use USD, and most stopped using Chivo (the privately-owned, government controlled wallet) after withdrawing their initial deposit.
> El Salvador is a failed state about to default on its national debt. It's not a real "government" in the way that most of us would define the term.
At least for now, El Salvador has enough cash on hand to pay the $800 million bond payable in February 2023. Current cash foreign reserves are about $3000 million.
I'd like to clarify though, that I'm not an economist, and that the processes required and implications of using those funds to pay the upcoming bonds due are outside my scope of knowledge.
> What criteria of the definition doesn't El Salvador fulfill?
The one that is actually important when it comes to currencies, having something valuable (whether it is a resource, power, political influence, military, finances, etc.) to back the currency up with.
But on the most technical level, you are correct, El Salvador has the ability to back up BTC in the same capacity as a country like Zimbabwe can back up Z$.
It doesn't have the resources nor a policy of "backing" bitcoin. By contrast, countries that issue their own currency have a central bank that is typically tasked with maintaining price stability, hence "backing" the currency.
From the article, El Salvador has been cut off from financial markets by two of the ratings agencies that played a pivotal role in the corruption that caused the 2008 GFC to happen. Their reason for cutting El Salvador off is because their debt to GDP is approaching 87% (a fraction of what other countries have run up, especially due to COVID).
The IMF (International Monetary Fund) which typically steps in to offer predatory financing terms, already outlined their demands: drop Bitcoin support.
So El Salvador really must have gone all into Bitcoin, right? Yes, somewhere between 25million to 73million dollars worth (in contrast to their 800million dollar bond or the ~6billion dollars they raise in taxes each year [1]).
Oh the horror. There is definitely no geopolitical maneuverings here. /s
One of their largest industries (up there with tourism) is remittance processing (mostly for out of the US) denominated in US dollars. Most of their local economy operates on US dolar too, which means accepting Bitcoin everywhere offers some significant advantages:
1. Not being beholden to the whims of American banks and the American government
2. Less administrative overhead would mean being able to offer more competitive services with lower fees [1]
3. Being Bitcoin friendly would attract more crypto oriented industries to be based out of their country: offering a wider market to tap into (global remittances)
[1] "Last year, they collectively transferred nearly $6 billion, or roughly 23% of the country’s gross domestic product, and a chunk of that went to the middlemen facilitating these international transfers." https://www.cnbc.com/2021/09/09/el-salvador-bitcoin-move-cou...
Sorry, I didn't see it. 23% of GDP is the value of the remittances that enter the country. This does not mean that remittance processing (which is an economic activity) represents 23% of GDP. Remittance processing is likely a tiny fraction of GDP, since it's a low value added activity.
I would rather argue though that even government backed currencies are fully dependant on trust, not government usage of it. Just check out any government currency hyperinflation event.