El Salvador, the first country to make Bitcoin official
In a video at a Bitcoin conference held in Miami, three months prior, President Nayib Bukele of El Salvador announced his ambitious vision for his country to be the first country to accept Bitcoin as a legal tender. El Salvador formally adopted the cryptocurrency on Tuesday, which means it may now be used to buy, sell, and pay taxes, as well as buy and sell products and services (like this McDonald’s breakfast).
While the international crypto community has applauded the legislation, many Salvadorans remain unconvinced of its ability to improve their lives. Nonetheless, Bukele, who has undermined parts of the country’s democratic institutions, remains a polarizing figure in the international community.
What it can mean for crypto adoption in the future?
El Salvador has made Bitcoin an official currency, besides the US dollar. Every technologically capable firm is obliged to receive bitcoin, according to the law. Chivo, the official bitcoin wallet, is a smartphone app that lets users transfer, receive, and spend bitcoin; citizens who download it will earn $30 in bitcoin. The government is also putting up hundreds of bitcoin ATMs across the country, has set up a $150 million trust to help with currency exchanges, and has purchased 550 bitcoins (worth roughly $25 million as of Wednesday) for the central bank’s balance sheet.
The first day was turbulent, with BTC falling as much as 17% to $43,050 due to a crypto market crash. Technical concerns had been fixed by late morning, and residents began tweeting about their success in making bitcoin purchases at chain restaurants. Many businesses, on the other hand, will not be dealing in crypto anytime soon: over half of Salvadorans lack internet access, owing to high data plan costs and unstable WiFi infrastructure.
BTC’s legality is questioned by the majority of Salvadorans. A recent study conducted by José Simeón Caas at Central American University in El Salvador found that two-thirds of respondents believe the law should be repealed, and 70% prefer to use the dollar. Despite the government’s assurances that citizens will be free to spend dollars as they like, the country is one of the poorest in the Western Hemisphere, and the volatility of bitcoin is one of the key reasons for the distrust.
Nonetheless, Bukele’s BTC forecasts for El Salvador are upbeat. The polarizing leader intends to increase BTC users from roughly 50,000 to over four million, while also providing financial services to Salvadorans, 70% of whom do not have a bank account. Bukele estimates that the measure will save Salvadorans $400 million in remittance fees each year. Remittances, or money sent home from abroad by relatives, account for about a quarter of the $27 billion economy.
El Salvador’s bitcoin law could serve as a model for other poor countries interested in integrating BTC’s low-cost cross-border transactions and providing innovative business prospects. On the same day that El Salvador’s law went into force, Panamanian legislators submitted a bill that would allow bitcoin and Ethereum to be accepted as payment methods. Sub-Saharan Africa just surpassed North America in peer-to-peer bitcoin transaction volume, demonstrating the value that many inhabitants of developing nations place on cryptocurrency.