El Salvador's crypto foray offers a cautionary tale for other countries

The spread on the interest El Salvador pays on its national debt over US treasury rates has widened

The tiny Central American nation of El Salvador has embarked on an interesting experiment by recognising bitcoin as legal tender. This is proving painful for many of its citizens but it’s a useful “pilot” project for larger economies that are contemplating the peculiarities of this new asset class.

El Salvador has a population of 6.5 million and GDP of about $27 billion. At a nominal per capita of less than $4,200, it is not a rich country. In 2001, it “dollarised”, which is a traditional Latin remedy for high inflation. It replaced its currency, then the colon, with the USD.