El Salvador Begins New Era, Adopts Bitcoin as National Currency

El Salvador makes Bitcoin history as the first nation to adopt bitcoin as its national currency as its bitcoin law comes into force.

By
Chung Yee
on
September 7, 2021
Category:
Blockchain News

Bold Move

El Salvador embraced Bitcoin as its legal tender on September 7th, three months after President Nayib Bukele first announced the nation’s intention. As of now, the decision to adopt bitcoin as the nation’s national currency has been received with mixed reactions. 

The Salvadorean Congress approved the decision to embrace Bitcoin with an overwhelming majority of 62 out of 84 votes on June 8. This week's move will be Bitcoin’s first real test as a legal tender, marking a new milestone for crypto adoption.

“Tomorrow, for the first time in history, all the eyes of the world will be on El Salvador. #Bitcoin did this. #BTC,“ tweeted El Salvadorean President Bukele on September 6th.  

The new law means businesses must accept bitcoin for their goods or services unless unable to provide the technology needed for the transaction. The decision to adopt Bitcoin marks a new era. Some have regarded this controversial move as a game-changer, while others regard it as a reckless move by an authoritarian regime. 

Source: El Salvador’s bitcoin move has raised hopes for a revival of its economy, but it also stoked fear that it may exacerbate an already ailing economy

Bukele is the man that brought Bitcoin to the Salvadorans. The President has tried to rally his country on social media and tweeted just hours before implementing the Bitcoin law that the nation acquired 200 bitcoins and now holds 400 bitcoins. 


A Risky Move 

The move by the Salvadoran President was aimed to provide financial inclusivity to its people. It fits into the narrative that Bitcoin is a solution for the unbanked and the underbanked. El Salvador is a country that relies heavily on remittances, and they account for more than 20% of its Gross Domestic Product (GDP). Bitcoin provides an avenue for Salvadorans to send back more than $4 billion each year. 

The radical change is not readily acceptable to its people. In a poll by Central American University (UCA) as reported by Reuters, at least 67.9% of the 1,281 people surveyed said that they disagree or strongly disagree with the use of Bitcoin as a legal tender. There is also skepticism that Bitcoin adoption was meant to benefit the people, not banks. 

The International Monetary Fund (IMF), in its blog post, on July 26, states, 

‘As national currency, cryptoassets—including Bitcoin—come with substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment….Attempting to make cryptoassets a national currency is an inadvisable shortcut.’  

El Salvador is reportedly in talks with the IMF for a $1 billion funding program. The nation may risk losing the much-needed financial aid given IMF’s hostile reaction towards Bitcoin. 

Cheering for El Salvador

The crypto community generally regards the move as a historic milestone. Other countries are echoing an almost similar sentiment by turning to Bitcoin as a solution. Countries like Panama and Paraguay may soon join El Salvador in adopting Bitcoin as a legal tender. A successful implementation and rollout in El Salvador should give Bitcoin the much-needed boost to convince other nations that it is possible to turn to bitcoin. 

Micheal Saylor, the Chief Executive Officer of MicroStrategy, took to Twitter to rally support in solidarity with the Salvadorans by purchasing $30 worth of bitcoin. Saylor is a strong and vocal proponent for Bitcoin and has been amassing a fortune through bitcoin.

The World Watches

El Salvador took a bold move as the first country to adopt Bitcoin as legal tender. The maneuver has sparked a lot of debate as the world watches as history unfolds. Whether this move will give a new life to the country’s ailing economy or cause more harm remains to be seen. Whichever direction it takes, it will be the first real test at a much grander scale. 

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance.

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