El Salvador’s Bitcoin adoption - Everything you need to know

[Karl_BC]

Greetings!

Cryptocurrency is one of the most important technological leaps since the internet. With its revolutionary features, people now have a seamless, transparent and cost-effective means to invest, trade and even process day-to-day transactions.

Despite the tough regulations imposed by different countries such as China and India, the growth of cryptocurrency is unceasing with other nations still considering it as a viable alternative for fiat currencies.

One of the countries that are making a head-on run in the crypto adoption race is El Salvador. On June 9, 2021, President Nayib Bukele announced that Bitcoin will be the legal tender of the country, along with the US Dollar. According to Bukele, this movement towards digital currencies will spearhead ‘financial inclusion’ and economic growth in the country.

Why did El Salvador make Bitcoin its legal currency?

Currently, El Salvador doesn’t have its own currency and is using the US dollar as its legal tender. When the coronavirus pandemic hit, the US Federal Reserve had to increase the circulation of the US dollar from $15.35 trillion to $20.26 trillion in May 2020. This sudden surge in money printing caused inflation that depreciated its purchasing power.

Moreover, President Bukele also said that almost $6 billion was lost to intermediaries and third-party financial institutions from remittances and cross-border transactions. He added that at least 70% of the country’s population doesn’t have access to traditional fiat services. With Bitcoin as a legal tender, Salvadorans won't have to create bank accounts to access their money and get financial services.

Additionally, the country will have an alternative to the US dollar in case of inflation. The country is set to fully adopt Bitcoin in August of 2021. To speed up the process of Bitcoin adoption in the country, Bukele is asking the International Monetary Fund for US$1 billion financial assistance.

Where can Salvadorans use Bitcoin?

According to the bill passed, ‘every economic agent’ in El Salvador is expected to accept Bitcoin for people’s transactions. When Bitcoin is adopted on a nationwide scale in the country, citizens can now pay, send and receive Bitcoin funds locally and internationally. The bill passed also states tax contributions will also be paid in BTC.

On the citizens’ end, using Bitcoin is still optional. The government guarantees that the exchange between Bitcoin and dollars will be easy at the time of transaction because there will be a $150 million trust fund stored in BANDESAL, El Salvador’s development bank.

President Bukele also said that people who will invest at least 3 Bitcoins in the country’s economy will gain instant citizenship in the country.

Mining through Bitcoin volcanoes

Another thing to note about El Salvador’s Bitcoin adoption is that they will use environmentally friendly means to mine tokens. To acquire BTC, they will utilise the energy coming from volcanoes from the state-owned geothermal electricity company in the country.

This will solve the massive power consumption problem associated with Bitcoin mining and other cryptocurrencies. According to Bekele, the process will be ‘very cheap, 100% clean, 100% renewable and cause 0 emissions from our volcanoes’.

What does the future hold for Bitcoin adoption?

El Salvador’s bold move to adopt Bitcoin as a national currency is proof that digital assets are not just useful for individual users and businesses alone. Right now, many countries in the Central America region are looking at Bitcoin adoption as a way to improve the economy. Countries such as Paraguay, Panama and Mexico are some of the nations considering using Bitcoin on a national scale.

Only time will tell if making Bitcoin a legal tender is a smart move for El Salvador, but this decision is a testament to the capabilities of cryptocurrencies to usher in a new age of a more inclusive and decentralised monetary system.

Thanks for reading. You are welcome to share your thoughts.

Regards,
Karl from Bitcasino


Source: Bitcasino blog

[mlawson71]

Thank you for that detailed information!