It's official: El Salvador is the first country to adopt Bitcoin as an official currency

nanoguy

Posts: 972   +14
Staff member
Why it matters: El Salvador is officially the first country to adopt Bitcoin as an official currency, an event that is viewed with equal amounts of excitement and anxiety by Salvadorians, economists, and supporters of cryptocurrency. This is the boldest Bitcoin experiment to date, as its results could make or break the Central American nation's financial recovery.

When the tiny country's plans first transpired earlier this year, many viewed the move as risky due to Bitcoin's volatile nature that makes its value swing on seemingly benign comments or news that regulators around the world are coordinating a crackdown on cryptocurrencies and eroding their potential as a means to store value or perform financial transactions.

Today, Bitcoin became an official currency for El Salvador alongside the US dollar, only a few months after adopting it as a legal tender. Excited about the move, President Nayid Bukele tweeted that his country is "making history" and that it now has 400 Bitcoins in its reserves -- the equivalent of $20.5 million as of writing. He also noted that the country's brokers will buy many more Bitcoins over time.

The excitement around the move hinges on the hope that migrants who send money back to their families in El Salvador can now do so more easily and cheaply than before. Almost three-quarters of the working population doesn't have a bank account, at least according to Strike, the company that provided the required infrastructure for Bitcoin transactions. Salvadorians can now download the "Chivo Wallet" on their phones for quick money transfers, but not all of them want to, and some are actively protesting the country's decision to embrace Bitcoin.

People who oppose the use of Bitcoin in the country believe it will cause even more economic inequality and put the livelihoods of poor people in danger due to the unstable value of the cryptocurrency. On the other hand, Bukele is convinced that more people will come around to the idea over time. Businesses are now required to accept Bitcoin in exchange for goods and services, and Salvadorians can also use it for tax payments. To encourage its use, the El Salvador government even made an exception that conversions between Bitcoin and the US dollar won't be subject to capital gains tax.

If this bold experiment proves successful, it has the potential to change the way we view cryptocurrencies. At the same time, many Salvadorian businesses are having a hard time adopting Bitcoin on such short notice, and Moody's Investors Service recently pushed the country's debt rating further into junk territory, warning the latest move could affect the government's ability to repay creditors in the near future.

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Theinsanegamer

Posts: 2,720   +4,256
I'm sure the ability to track all spending of said currency is just a side benefit and not at all a driving force behind this decision.

"People who oppose the use of Bitcoin in the country believe it will cause even more economic inequality and put the livelihoods of poor people in danger due to the unstable value of the cryptocurrency"

Well given how unstable the US dollar has become and will continue to do so, it may not be as crazy an idea as one may think....
 

YouShallNotPass

Posts: 10   +34
Its not just about Bitcoin's volatile nature. By making a currency that can be generated by everyone in the world as the official currency, I can foresee something bad is gonna happen to that country. Just imagine if everybody's display card can suddenly be used print USD. Its not gonna work. The whole bitcoin things just doesn't make sense no matter how many regulations are added on top of it.
 

elementalSG

Posts: 192   +254
From what I read, El Salvador uses mostly US Dollars in the form of paper cash because the country isn’t stable enough to have its own currency. So why not give Bitcoin a try as their electronic currency where all the infrastructure is already set up for you? Could make it easier than having to worry about all the cash, literally, hidden under a mattress
 

wiyosaya

Posts: 6,523   +4,909
From what I read, El Salvador uses mostly US Dollars in the form of paper cash because the country isn’t stable enough to have its own currency. So why not give Bitcoin a try as their electronic currency where all the infrastructure is already set up for you? Could make it easier than having to worry about all the cash, literally, hidden under a mattress
Adding instability on top of instability makes perfect sense, doesn't it ?
 

Achaios

Posts: 207   +560
Τhe elephant in the room is MS-13.

It will be easier now for MS-13 to launder money as well as send money back to Salvador outside the US banking system and no need to go bury USD all over Salvador like the late "Porro Sabanero" did in Colombia back in the 1980's.

"We would go till our field and unearth suitcases filled with USD".

Heh.
 

elementalSG

Posts: 192   +254
Adding instability on top of instability makes perfect sense, doesn't it ?
“The excitement around the move hinges on the hope that migrants who send money back to their families in El Salvador can now do so more easily and cheaply than before. Almost three-quarters of the working population doesn't have a bank account, at least according to Strike, the company that provided the required infrastructure for Bitcoin transactions.”

If I ran a government that had a chance to bring a lot more money into the country through Bitcoin, I’d risk the instability too.
 

Geralt

Posts: 635   +911
Its not just about Bitcoin's volatile nature. By making a currency that can be generated by everyone in the world as the official currency, I can foresee something bad is gonna happen to that country. Just imagine if everybody's display card can suddenly be used print USD. Its not gonna work. The whole bitcoin things just doesn't make sense no matter how many regulations are added on top of it.
What country?
 

George Keech

Posts: 62   +74
Given Bitcoin is trying to get away from the "only used by Criminals" look this is probably not the best country to use it PR wise
 

NightAntilli

Posts: 774   +973
Its not just about Bitcoin's volatile nature. By making a currency that can be generated by everyone in the world as the official currency, I can foresee something bad is gonna happen to that country. Just imagine if everybody's display card can suddenly be used print USD. Its not gonna work. The whole bitcoin things just doesn't make sense no matter how many regulations are added on top of it.
It makes perfect sense if you understand money.
The fact that anyone can (attempt to) mine Bitcoin is a good thing. We understand that monopolies are bad, but, somehow we believe that if bankers and/or governments have a monopoly on money it's a good thing.
There is a hard cap on the amount of Bitcoin that can be created. That alone, beats any fiat currency in the world.

Bitcoin was developed with the aim of being a hedge against the global monetary crisis, of which we got a tiny preview of in 2008. Bitcoin is the only tech in existence that pretty much guarantees sound money. It is literally the savior of global financials. Even more funny... El Salvador literally means "The Savior". What's in a name, right...?
 

emmzo

Posts: 349   +332
It`s one of these stories where you can`t foretell a great decision or an absolute disaster. But it`s one or the other.