Photo: Camilo Freedman/Bloomberg via Getty Images
El Salvador’s bitcoin gamble

Hello and welcome to Protocol | Fintech! The SEC is closed today for Juneteeth. This Friday: El Salvador gambles on bitcoin, the Wealthfront CEO praises Plaid, and Mark Cuban stumbles with a stablecoin.
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El Salvador became a bitcoin trailblazer this month. But the Central American country's bid to become the first country where bitcoin is an accepted and legal way to pay bills, save and invest has gotten mixed reviews.
That's largely because it's not clear what President Nayib Bukele, who spearheaded the move to adopt bitcoin as legal tender, is trying to accomplish. It certainly didn't help that he made the move as his government has been taking heat for what critics call authoritarian tendencies.
"Every restaurant, every barber shop, every bank" must accept bitcoin, Bukele said as the Salvadoran legislature debated the bill he sponsored. The proposal passed easily last week, prompting one lawmaker to declare: "Bitcoiners of the world, the time has come."
Bukele has an even grander vision. In a recorded video, the flamboyant young leader who often sports a black leather jacket told attendees of a Miami bitcoin convention last week, "We hope that this small decision can help us push humanity at least a tiny bit into the right direction."
Bitcoin's new evangelist has an image problem. The bitcoin "victory" in Central American must wrestle with a painful truth: It is being spearheaded by a head of state described in Foreign Policy as as a "young, dynamic and impulsive" leader with "an erratic style of government."
"This is likely to be a disaster." That's the prediction in Foreign Policy by author David Gerard, who called it a "stealth de-dollarization." That may be going too far. But given the country's other problems and the context in which El Salvador is embracing bitcoin, Bloomberg columnist Lionel Laurent may be more on point: "Right now, it looks like a gamble."
— Ben Pimentel
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What fintech trend is most troubling for you?
What is considered fintech is getting more blurry by the day as behemoths like eBay, Amazon and Walmart entered the ecosystem or secured banking charters in order to offer more products and services to their customers. Who the dominant players are in financial services today is getting murkier. Jamie Dimon of JPMorgan said it best to his shareholders: "We should be scared shitless." The same is clearly true — and worse — for smaller financial institutions. Competition is coming from new places and they have very, very deep pockets.
What fintech company besides your own have you been most impressed with this past year?
I've been impressed by Plaid's journey over the past year or so. It's well-known that they were (almost) acquired by Visa, but that the deal fell apart due to antitrust concerns. Despite that roadblock, Plaid still managed to raise $425 million in a series D in April, and now has a $13.4 billion valuation. That's a success story by any stretch of the imagination.
What fintech sector or company is most underrated right now?
I'm going to give that prize to Community Development Financial Institutions. The Biden administration is thankfully elevating the importance of CDFIs as critical to the recovery of the economy — but a lot of people don't even understand what CDFIs are and the critical role that they play in their communities.
They are mission-driven, not shareholder-driven, and they're wholly dedicated to delivering responsible and affordable lending to help lower-income communities, just like the ones hit hardest by the pandemic. Although not a fintech sector per se, many of these CDFIs have started to partner with technology companies to make their lending processes more efficient. They're rapidly digitizing, and it's exciting to watch.
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That's the amount invested by big tech companies' venture arms in fintech in 2020, a 4% drop from 2019 — but spread across 52% more deals, according to CB Insights.
Thanks for reading — see you Tuesday!
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