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El Salvador is officially the first country to adopt bitcoin as legal tender. The president, Nayib Bukele, commented that the move would see the majority of its citizens access bank services for the first time. Besides, it will save over $400 million in fees on remittances sent home from overseas.
Last year alone, remittances to El Salvador came to close to $600 billion. It represents about 23% of its total gross domestic product. It makes it one of the highest ratios worldwide.
Pushing for Crypto Adoption
The El Salvador parliament approved a law in June that would see crypto become a tender. Consequently, citizens would use it for all goods and services besides the U.S. dollar. Within just 24 hours of discussion in the parliament, Congress approved the bill. After all, the majority of the members are the president’s allies.
Moreover, the government is installing over 200 bitcoin ATMs around the country. Soldiers guard some of these to end any arson by opponents.
To encourage more citizens to hop on to the ship, the government gives $30 for each citizen. They receive the money in the form of bitcoins after registering for the Chivo wallet.
On Monday, September 6, El Salvador bought its first 400 bitcoins in two rounds of 200 each. The market value for 200 bitcoins at the time of purchase was about $10 million. The move pushed the prices by about 1.49% to reach $52,680. Following the acquisition, the country promised its citizens should expect more purchases.
Many countries are working to restrict cryptocurrency adoption through increased regulations. However, Gerson Martinez, a bitcoin enthusiast, believes that El Salvador will not be the last country to make bitcoin a legal tender.
El Salvador Citizens Remain Skeptical
Both Regulators and experts have brought forward concerns about cryptocurrency volatility. Due to this, they think that the country is exposing its citizens to risk without any protection.
Laura Andrade, director of the Public Opinion Institute of the Central American University, thinks the same. She said that the lawmakers decided without proper consultation from the citizens.
According to a recent poll, about 70% of El Salvador citizens are against crypto as a payment method. They will continue using the U.S. dollar, a legal currency in the country, for over 20 years.
An economist from the University of El Salvador commented that bitcoin’s high volatility would harm consumers. As the prices shift, so will the prices of various goods and services. The currency was beneath $30,000 in June after hitting an all-time high of around $64,000 only two months earlier.
Salvadoran Foundation for Economic and Social Development (FUSADE) said it was unconstitutional to mandate adoption for merchants.