How Did El Salvador Adopt Bitcoin?
El Salvador adopted Bitcoin as a legal tender, but what made the country so confident about Bitcoin is the question.
El Salvador’s president, Nayib Bukele, believes bitcoin will assist in the country’s worst economic issues: money sent abroad accounts for up to a fifth of the economy but has high costs and only 70% of people have bank accounts. As a result, the president claims he will make financial transactions easier with the aid of cryptocurrency. As a consequence, the country has set out to include the poor people in the nation’s economy.
There are only two things that are being used in El Salvador, other than cash: Facebook pages and cryptocurrencies. Also, it is planned to be used for voting soon.
The Central Bank of El Salvador has said it will not regulate cryptocurrencies since they have nothing to do with money because “bitcoin is not a virtual currency”. He also added that the Central Bank of El Salvador is thinking about launching their own cryptocurrency — probably called “el salvacoin”.
The president bought more bitcoins recently.
What did the IMF ask El Salvador about its plans?
The International Monetary Fund (IMF) recently advised El Salvador against issuing bonds denominated in crypto. On the same day that El Salvador’s president announced plans for the world’s first “bitcoin city,” which will be paid for with bitcoin bonds, the IMF issued a caution.
Other nations have also been advised by the IMF to be wary of issuing these bonds.
The IMF advised the country to be extremely careful while issuing cryptocurrency bonds. They think that cryptocurrency markets are still in their infancy and there is no regulatory oversight of these markets, so they should not offer any type of financial product linked to cryptocurrencies. However, many countries are already considering issuing bonds in cryptocurrencies. Venezuela has already made its first offer of an oil-backed token named Petro, while Switzerland’s largest online retailer is also accepting ether for payments.
Countries where the legal tender is bitcoin
Bitcoin’s potential uses depend on the user’s country of residence.
If that country allows bitcoin to be used legally as a form of payment for goods and services, then it has the potential to provide an alternative to using fiat currencies exclusively.
For example, Japan, South Korea and Malaysia have all legalized payments made with cryptocurrency under certain conditions. The US has also legalized some types of payments with cryptocurrency but hasn’t given crypto coins full legal tender status yet.
In Guatemala, there was news stating that Guatemalan authorities are thinking about issuing their own digital token called Guatecoin, which could help expand the involvement with cryptocurrencies. There was also news that the Central Bank of Guatemala is considering joining blockchain.
Rodrigo Bolaños, an experienced lawyer in cryptocurrency and blockchain technology stated that all public institutions such as the Government must issue a statement regarding cryptocurrencies. He also added that this will help regulate ICOs and prevent possible fraud or money laundering.
Will other countries adopt bitcoin as legal tender?
It is still too early to say if any other countries will adopt bitcoin as a legal tender.
However, there is no doubt that the cryptocurrency system would be an effective tool for Central Banks to issue their own digital tokens and become more involved with blockchain technologies. Even though some believe it would make banks obsolete, others think cryptocurrencies could help make banking more accessible and secure.
Cryptocurrencies are already being used as a mode of payment in many countries; however, this use is not backed by the government authorities of those countries officially and hence not considered as a legal tender there.
It’s almost inevitable that more countries may adopt cryptocurrencies as legal tender but regulations are necessary for effective implementation.