In just 12 years since its inception, we see Bitcoin becoming legal tender in a sovereign state. El Salvador is now becoming the first sovereign nation to adopt Bitcoin as the country's official currency. In simple terms, this means that all businesses are required to accept Bitcoin as a means of payment. The government will set up a $ 150 million fund at the Development Bank as a firewall to compensate for currency instability that could hit traders.
What is remarkable is that El Salvador, while already having the dollar as their official currency, decided that this was not enough. The government has decided that it wants something better. Maybe because most of the population is out of the banking system. The vast majority of the population of El Salvador does not have a bank account while working in the black economy. However, now with Bitcoin’s, people will be able to access it, simply by having a mobile phone. And it is not just that. Much of the money entering the country from remittances, perhaps up to 40%, does not reach the legal recipients as it is lost along the way, by intermediaries.
It is no coincidence that local citizens immediately embraced the application of “Strike”, a digital applications company, to build modern blockchain-based financial infrastructure, which quickly became the most popular mobile application in the country.
President Nayib Bukele stated: “Economic integration is not only a moral imperative but also a way to grow the country's economy by providing access to credit, savings, investment, and secure transactions”. According to him, “if 1% of the total value of Bitcoin is invested in El Salvador, it will increase the country's GDP by 25%”.
Bitcoin will gain millions of new potential users, residents of the country, and could be the fastest-growing way to transfer billions of dollars a year in remittances from immigrants to El Salvador. In addition, it is not at all unlikely that there will be a large movement of businesses in the country. “Strike” will definitely relocate some of its operations there and is unlikely to be the only one. The real estate market will become more accessible to Bitcoin holders.
Adopting Bitcoin as official money, even from a small country, is very likely to bring about big changes. It has not only symbolic or psychological implications, but also political and legal implications. In international trade with El Salvador, Bitcoin should now be treated at the same level as any official currency from the other banks in the world.
Businesses and citizens are obliged to accept it if it is offered for payment in exchange for the delivery of property, products, services. It is noted that under US law, money "is a medium of exchange approved or adopted by a domestic or foreign government."
The acceptance of Bitcoin by a sovereign state as an official currency facilitates in legal and in accounting terms businesses or banking institutions to include it in their cash. Central banks can preserve it as part of their foreign exchange reserves.
Bitcoin deniers have claimed that with Bitcoin people could not buy anything. Now it is proved that they can buy more and more things around the world. In 2021, as has been officially announced, Visa - Mastercard will be connected to the personal wallet of cryptocurrencies, in the same way, that they are connected to the bank account we have in euros. Therefore, people will buy whatever they want with a card linked to bitcoin. Literally everything and everywhere.
At the same time, citizens are beginning to press politicians from other Central and South American countries to follow El Salvador's example. Many MPs from Argentina, Brazil, Paraguay, Panama, Colombia, Mexico, Nicaragua, changed their photo, now appearing with lasers in their eyes.
The acceptance of Bitcoin as an official currency by one country has provoked different reactions around the world.
The Bitcoiners took it for granted, of course, as a very positive event. They believe that Bitcoin has the potential to improve the living standards of the people of El Salvador. That their expectations were confirmed that cryptos could change the world for the better.
On the other hand, critics of Bitcoin took the acceptance of Bitcoin as an official currency as something indifferent or even silly. Others were annoyed that Bitcoin was recognized by an official state while arguing that the corrupt system that has kept El Salvador poor and underdeveloped supports a president who, they claim, is populist and he is only interested in international publicity and power, without actually believing in the potential of Bitcoin.
Nevertheless, the fact is that the existing banking system was not able to protect the inhabitants of this country from excessive poverty. The country seems to be looking for an alternative proposal and seems that doesn't want to remain in the current monetary regime.
The difference in perspective on Bitcoin between its supporters and critics once again seems to be chaotic. But the fact is that the wider acceptance of cryptocurrencies is coming much faster than one might imagine. It remains to be seen whether the latest development in the acceptance of Bitcoin as an official currency in a country is a spark that can become a fire that in the future can turn into a conflagration.
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