Did El Salvador just make Bitcoin into real money?
El Salvador recently approved a law making Bitcoin — the world’s most popular of more than a thousand cryptocurrencies — a legal currency there as of September. The reaction was immediate, although there was no agreement on the importance of the move. Nor was there much discussion of the important underlying issues of whether some combination of cryptocurrencies will challenge the U.S. dollar as the world’s dominant reserve and trading currency or whether non-governmental digital currencies might eventually challenge government currencies.
The stakes could not be higher, and the cast of characters is head-spinning.
Since the 1940s, the dollar has been the foundation of international trade. All countries and their central banks must hold dollars to engage in trade, and the U.S. government has enjoyed unique controls over international trade such as its ability to impose severe…