El Salvador was the first country to adopt Bitcoin as legal tender, leading the nation and many other countries to debate the opportunities and threats of cryptocurrencies.
The adoption of the new currency comes three months after the Legislative Assembly specifically approved the so-called Bitcoin Act. Which came into force with an official majority thanks to the approval of 62 of the 84 MPs who make up Parliament.
To encourage use in a country where the majority of the population does not have internet access, the government is inviting Salvadorans to download a new digital wallet app that will give all citizens $30 worth of bitcoins.
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What is Bitcoin?
There are thousands of cryptocurrencies in the world, digital currencies with no physical form that exist and are only trad online.
They are created when a computer “mines” money by solving a series of complex mathematical programs.
Bitcoin is the most popular and most expensive of all.
What is the New Salvadorian Law?
In June, the Salvadoran Parliament approved the ratification of cryptocurrencies as legal tender.
In particular, it stipulates that the use of virtual currencies will be “unrestricted, with liberating and unlimited power, in any transaction and any capacity that any person or entity, public or private, wishes to conduct.”
The exchange between bitcoin and the dollar is determined “free by the market” and is not subject to capital gains tax like any other legal currency.
Starting this Tuesday, all economic entities must accept bitcoin as a means of payment.”When offered to them by the person purchasing a good or service.”
The government has promised to put the institutional structure needed for the cryptocurrency to circulate and has begun installing around 200 ATMs where Bitcoin can be exchange for dollars. However, experts warn it won’t allow it for exchanges alone will suffice. Venue.
Why is this A Milestone?
No country in the world had previously dared to declare cryptocurrencies legal tender.
In Japan, one of the world’s most significant advanced states in using digital currencies. A 2017 legislative reform made bitcoin a form of tender that some have interpreted as legal tender.
However, a 2018 Central Bank of Japan report clarified that cryptocurrencies “are not legal tender and their use for payments. Depends on the counterparty’s willingness to accept them.”
What do we know about the bitcoin law that will make El Salvador the world laboratory of this cryptocurrency by turning it into legal tender?
He drew international attention to the fact that El Salvador, a small country. With a modest economy, was the first to take this step. Which was announce and approved in record time and with little debate.
The move comes as many governments around the world, such as China, are moving in the opposite direction. Trying to limit the adoption of cryptocurrencies through increased regulation.
What Benefits Can it Bring?
Among the main advantages point out by the defenders of this initiative, it is highlighted that, thanks to transactions in bitcoins. The population could save intermediary commissions on the remittances. They receive from abroad and that they can amount to up to 30% of the money sent, according to Bukele said.
The president has opined that the change will also lead to the generation of jobs and an increase in investments.
Despite the plague, last year the country received almost US$6 billion from its emigrants, of whom some 2.5 million live in the US.
Given the changing value of bitcoin and the fees that must be paid to some applications for its purchase, some critics have pointed out that the money kept by exchange houses and shipping agencies will now go to the hands of technology companies.
El Zonte, the town of El Salvador pioneer in the use of bitcoin
The president also highlighted that around 70% of the population does not have a bank account and works in the informal economy. So that cryptocurrencies could improve their financial inclusion .
Only 45% of the Salvadoran population has internet access, and more than 90% of rural households lack it. According to a 2020 study by the IDB, IICA, and Microsoft.
What do Salvadorans Think?
A Central American University (UCA) survey found that only 4.8% of 1,281 respondents understood what bitcoin is and how it is use. More than 68% of the respondents said they disagreed with using cryptocurrencies as legal tender. Jeanette Sandoval, 70, sells groceries for home delivery with her son and says she won’t get involve.
“I’ve always been open to change, but I disagree this time. Our customer say they won’t pay in bitcoin,” Joe Tidy of the BBC told the reporter.
“In my country, many illiterate people barely have a cell phone, not a smart one. But one of the old ones. So they are not going to use it,” he adds.
For his part, 26-year-old Salvadoran taxi driver Daniel Hércules says he is excited. About the move but worried about the stability of his earnings.
Bitcoin in El Salvador is use as legal tender after being adopte by the Legislative. Assembly of El Salvador in 2021. This made El Salvador the first country to adopt bitcoin as legal tender.