The Central American country becomes the first nation to recognize Bitcoin as legal tender.
Cue the “Do you take Bitcoin?” memes. El Salvador has officially become the first country to adopt Bitcoin as a national currency on Tuesday 7 September, 2021, kicking off a new wave of monetary trends that recognize the cryptocurrency as legal tender alongside the U.S. dollar starting effective immediately. This is a move that has the world divided over whether it’s an opportunity or a risk for a country that’s been plagued with economic uncertainty.
President Nayib Bukele announced late Monday that his government has purchased another 200 Bitcoins ahead of El Salvador’s formal adoption of the currency. El Salvador now holds 400 bitcoins, which are worth nearly US$21 million at current trading levels. El Salvador has partnered with digital finance company Strike – a crypto payments processor developed by Chicago-based startup Zap Solutions – to create the infrastructure required.
Bitcoin was the first-ever decentralized digital currency, launched in 2009 by an anonymous programmer or possibly a group known as Satoshi Nakamoto. Satoshi first published the concept of Bitcoin in a whitepaper in 2008, describing it as an electronic peer-to-peer cash system. Straightforward enough, the whitepaper also elaborates on the concept of blockchain technology for the very first time, which no doubt has had a revolutionary impact on the world. It’s also one of the primary reasons for Bitcoin’s success. Beyond Bitcoin and cryptocurrencies, the distributed ledger system of Blockchain has several use cases across various sectors. And this is largely made possible by its characteristics – from decentralization, data immutability, and transparency amongst other things.
The future of El Salvador’s economy
With everything new, there is a process of weighing the good, bad, and ugly that naturally follows. While the world watches as the historically economic back-bencher reaches for cryptocurrency, equal parts fear and excitement are to be expected. El Salvador has been operating as a dollarized economy, meaning it doesn’t have a currency of its own. Instead, it uses the U.S. Dollar as its domestic currency. El Salvador’s government is hopeful that using bitcoin as legal tender will attract new investments from around the globe. Authorities are also confident about the power of cryptocurrency in reducing commissions paid for sending remittances from abroad. However, many citizens are still skeptical about Bitcoin owing to its volatility and lack of tangible presence.
“The process of #Bitcoin in El Salvador has a learning curve. Every step toward the future is like this, and we will not achieve everything in a day, nor in a month,” Bukele tweeted. “But we must break the paradigms of the past.”
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