El Salvador has made history as the first country in the world to recognise Bitcoin as legal tender.
The El Salvador government is one of the world’s leading digital currencies proponents. Other than making Bitcoin legal tender, it is providing citizens with a nationally accepted, crypto wallet “Chivo”. Those who use the wallet for the first time are awarded $30 in BTC. Chivo’s underlying technology is provided by the crypto wallet company, BitGo.
By accepting crypto as legal tender, the citizens of the country can now use it for everyday transactions. This gives the coin the same position in the economy as the US dollar that has been in use since 2001.
However, that is not to say that every merchant must accept payments in the form of Bitcoin. The traders are free to choose the payment method they are most comfortable with. Just like how other traditional businesses are allowed to choose to accept credit card or cash payments only.
Why did El Salvador make Bitcoin legal tender?
The main reason why El Salvador made Bitcoin a legal tender is for the economic boost. The country has had a struggling economy for some time, the new currency addition is like a new boost.
The country’s president, Nayib Bukele, said the coin is a means towards the country’s economic freedom. He tweeted that the Bitcoin process is a learning curve. At the same time, it is a way of shifting from the paradigms of the past as the country moves towards the First world.
Given increased crypto acceptance, allowing Bitcoin use will increase investors spending in the country. The country is planning to run a green energy Bitcoin mining plant, powered by geothermal energy from the country’s active volcano. This will eliminate the Bitcoin mining environmental concerns while increasing economic gains.
Opposition to Bitcoin in El Salvador
Making Bitcoin a legal tender was a popular motion in parliament with a supermajority of 62 members of parliament in support, 9 against, and 3 abstained. However, the move has been widely opposed by some of the country’s population. A survey by Universidad Centroamericana José Simeón Cañas, a Jesuit college based in El Salvador, has established that 67.9% of the Salvadorans don’t like Bitcoin as legal tender.
The main reason for the opposition is because they don’t know how the currency works. Some of the president’s political opponents have also opposed the move, even protesting at the parliament building. They claim making Bitcoin a legal tender is unconstitutional and is likely to come with various harmful effects.
The move has also got international disapproval from the International Monetary Fund (IMF) who believes it comes with various macroeconomic, financial, and legal concerns. JP Morgan, one of the world’s largest financial institutions, says El Salvador is likely to find limitations in the use of Bitcoin as a legal tender.
It was obvious that making Bitcoin a legal tender in El Salvador would come with various challenges. However, it is one of the best moves for the crypto world and bolsters its move towards becoming a mainstream currency.