El Salvador Becomes First Country to Make Bitcoin Legal Tender
Historic Decision Aims for Financial Inclusion and Economic Growth
On Tuesday night, El Salvador’s Congress approved President Nayib Bukele’s proposal to classify Bitcoin as legal currency, making it the first country in the world to do so. The decision was met with widespread enthusiasm from some, while others raised concerns about the cryptocurrency’s volatility.
Key Details of the Decision
- Approval: 62 out of 84 possible votes
- Implementation Date: The law will take effect in 90 days
- Legal Tender: Bitcoin will be a legal tender alongside the US dollar
- Business Obligations: Every business in El Salvador must accept Bitcoin as payment for goods or services, unless it is unable to provide the necessary technology to facilitate the transaction
Benefits of the Decision
The introduction of Bitcoin as legal tender is seen as a major step towards financial inclusion, particularly for the 70% of Salvadoreans who do not have bank accounts. El Salvador’s economy relies heavily on remittances from abroad, which make up around 20% of the country’s GDP. The decision could potentially benefit the country’s economy by making it easier for citizens living abroad to send money home.
Potential Economic Benefits
- Increased Investment: The move is expected to attract new investment and innovation in El Salvador
- Tourism Growth: The introduction of Bitcoin as legal tender may also boost tourism, as it makes it easier for visitors to make purchases and send money back home
- Economic Development: President Bukele believes that this decision will bring financial inclusion, investment, tourism, innovation, and economic development to the country
Concerns and Complications
While some experts welcome the decision, others have raised concerns about the potential impact on the country’s financial stability. The introduction of Bitcoin as legal tender has also raised questions about its volatility and potential complications with international organizations like the International Monetary Fund (IMF).
Potential Risks
- Volatility: The value of Bitcoin can fluctuate significantly, which may lead to financial instability
- International Complications: The decision may complicate matters with the IMF, where El Salvador is seeking a more than $1 billion program