El Salvador has now become the first country in the world to have accepted Bitcoin as legal tender.
The president, Nayib Bukele, officially announced this move after lawmakers unanimously approved it on September 7, 2021.
The move, which comes three months after he first proposed it, stands out as almost all countries and regulatory bodies have been cautious about legalizing cryptocurrencies.
Despite the several downsides associated with Bitcoin, including its high volatility, many people would wonder why El Salvador has chosen to be a Bitcoin laboratory in this new age.
If you are curious about why President Bukele made this move and what effect it could have on the economy of El Salvador, then you should keep reading this article.
El Salvador Adopting Bitcoin As Legal Tender
After a prolonged debate, El Salvador President Nayib Bukele is set to make history by signing a bill accepting Bitcoin as legal tender alongside the U.S. dollar.
Bitcoin is a digital currency, which means that it exists only as a computer file that can be used to buy things.
It’s not physical like money or gold. Instead, the Bitcoin network tracks how many coins are in circulation and records who has them.
Bitcoin is also considered a form of money and can be exchanged for other currencies, such as the U.S. dollar or British pound sterling.
However, unlike legal tender, Bitcoin isn’t backed by any government; it’s just a commodity that people believe has value because they’re willing to trade other goods and services for it (usually online).
This makes bitcoin both an investment tool and an alternative form of payment in some countries around the world (including El Salvador).
Why Is El Salvador Choosing Bitcoin?
You may be wondering why the government is encouraging bitcoin use. While El Salvador is a developing country, many people don’t have access to banks.
According to the World Bank, only 2% of the population has bank accounts, and just 6% of GDP is paid for through banks or non-cash financial institutions.
Bitcoin can help these individuals get around this problem by allowing them to safely and easily make payments online without having to set up accounts at traditional banks.
Bitcoin offers some major benefits for people living in less-developed countries like El Salvador.
But what about those who live in countries with well-developed economies? There are plenty of great reasons why you might want to buy bitcoins yourself!
Additionally, President Bukele also suggested that adopting Bitcoin as legal tender in the country would spur investment in the country and will be of great help to the majority of the population who doesn’t have access to traditional financial services.
According to the president, El Salvador presently has about 550 BTC, which is equivalent to about $26 million.
What Experts Say About El Salvador’s Bitcoin Adoption?
Although the government of El Salvador is not currently regulating Bitcoin as legal tender, it has made its stance clear.
The Central Bank of El Salvador has issued a warning to citizens about the risks associated with using Bitcoin for payments.
In addition to being unregulated and risky, experts say that Bitcoins are not backed by a central bank and thus should not be treated as legal tender.
Though some people may argue that Bitcoin can become a stable currency, at this point in time, it does not seem likely.
For something to become currency, it must appeal to both consumers and businesses as a payment method.
And this is something that experts say will never happen with Bitcoin (at least not until someone figures out how exactly they can make all those transactions without going broke).
Additionally, many experts are skeptical about the move because of Bitcoin’s high volatility and speculative nature.
They believe this could mean great doom to the economy of the country in the near future.
At the same time, most citizens also aired their opinions about the move, stating that Bitcoin’s unpredictable nature is what scares them the most.
What Is El Salvador Doing To Facilitate the Acceptance of Bitcoin?
Despite a few critics and opposition to the move to accept Bitcoin as legal tender, the president of El Salvador is putting various measures in place to further facilitate the acceptance of the new currency.
The law requires that all businesses in the country should accept Bitcoin as a payment method in their businesses and stores.
Meanwhile, the government will also commit about $150 million to trust to help dollar conversion.
That’s not all. The government has also developed its own digital wallet, which it calls “Chivo,” meaning “cool” in the Salvadoran language.
The government also promised to give a $30 Bitcoin bonus to anyone who downloads and uses the wallet.
It has also stationed more than 200 ATMs across the country and other 50 locations to help citizens easily withdraw funds in cash.
