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El Salvador Hurriedly Adopts The Bitcoin Cryptocurrency As Legal Tender

El Salvador is currently the first and only country in the world to adopt Bitcoin as its legal tender. This change makes the bitcoin alongside the dollar the country’s legal for transactions.Why people invest in bitcoin: Psychology of cryptocurrency

Its President Nayid Bukele made the announcement via a tweet about the historic moment. This news came on the back of the country purchasing about 400 Bitcoins.

The move to make Bitcoin a legal tender has been in the works for months. El Salvador finally passed the legislation in June 2021. El Salvador also launched its digital wallet “Chivo” which it intends for holding and transferring bitcoins.

El Salvador bitcoin law

Although adopting cryptocurrency as a legal tender looks futuristic and techy, the country’s population is relatively no-tech savvy. CNN reported that a research by the CEO of Strike, a digital finance company says that about 70% of the El Salvador “active population” don’t have access to a bank account.

What the country needs are active bank accounts, fewer cash-only transactions and more financial inclusion. Bitcoin or cryptocurrency has relatively been very volatile, and this could hurt the country’s economy in case of a swing.

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Bitcoin rose historically over $60,000 in April and later crashed to less than half of its peak value some months ago. Besides, there have been several calls for the regulation of cryptocurrency throughout different economies.

Even Salvadorans are not keen on adopting cryptocurrency. A survey by the Central American University found that 70% of the population are against adopting bitcoin as a legal tender.

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To make matters worse, the rating agency Moody has downgraded the country’s debt rating. Also, the IMF warns that the new move might have destabilising effects on the economy soon.

The only meaningful application of the adoption might just be remittances. Philip Gradwell, chief economist at data platform Chainalysis says “Bitcoin isn’t really designed to be a means of exchange so this is an early experiment for the currency”Free Bitcoin: El Salvador Giving Away $30 in BTC to Everyone Using Government Wallet – Regulation Bitcoin News

I think the main use in El Salvador is really going to be around remittances and people using it to save some wealth and really perhaps just to be some competition to the dollar in the country.” Time will tell on how the adoption of bitcoin in El Salvador will affect its economy and its people.


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