Is it helpful?
The president of El Salvador Nayib Bukele on Saturday declared plans to make Bitcoin as a legal tender in the Republic of El Salvador. The Central American country that speaks Spanish with an approximate population of over 7 million citizens, now has Bitcoin as one of its legal tenders. El Salvador uses the US dollar as its official currency and now the first country to adopt Bitcoin as a legal tender.
The economy of El Salvador is dependent on the stability of the dollar. In the case of inflation in the US, the economy of this republic is affected. An alternative currency is a good idea as it takes away the dependence on one currency which is also not in El Salvador’s power to control.
It is also worth mentioning, after war broke in El Salvador, people migrated to different countries with better economies. The war led to the adoption of the US dollar and also people receive payment and almost $1 billion is paid to third parties to process the payments. Adopting Bitcoin means that there will be 1 million low-income families increasing their income.
Data shows that 70% of El Salvador population is not banked. However, this population can access a smartphone. What this means is Bitcoin will help to increase financial inclusion. People will be able to save and borrow which will in return grow the economy of the country.
The bill was passed on Thursday since Bukele’s party has the majority members in the parliament. This means Bitcoin can now be used for buying and selling in the country.
What that moves means
Most of the remittances done to El Salvador are through US banks. That means these banks are about to lose the revenues they made through the transactions. Caitlin Long, a 22-year Wall Street veteran believes that the move by El Salvador will be a reason for banks to start Bitcoin transactions. She also adds that being a legal tender means Bitcoin should be treated as any other foreign currency.
Central banks especially the US banks have controlled the fees and how money is remitted. Having a decentralised payment system will cut the transaction fees. El Salvador has made a deal with Strike as the app which will be used in making transactions in the country.
Bitcoin has a market capitalisation of $684 billion. If 1% of the market capitalisation is invested in El Salvador, the GDP of the country will increase by 25%. Bukele, 39 years old is now a digital-savvy leader. He has gained popularity for the move and has challenged many countries of the world.
In the meantime
Bitcoin is still on the dip. Prices are choppy, at the time of writing, Bitcoin was selling at $34,179. Bitcoin has made losses of up to half of its last high of $64,000 achieved at the beginning of the year. This comes after former US President Donald Trump said that Bitcoin is a scam. Trump said in the interview with Stuart Varney on Fox Business Network that he doesn’t “like” Bitcoin because it is another currency that is competing with the dollar. Trump has always as he said in the interview that he wants the US dollar to be the world’s currency.
Most billionaires in the US have not given a negative critique on Bitcoin. Elon Musk has always shown how he believes cryptocurrency to be the future of crypto. However, Musk is one of the price movers in the crypto market. His company Tesla, adopted Bitcoin as a form of payment and later discontinued it.
What is the Impact?
El Salvador now stands as the first country in the world to make Bitcoin a legal tender. If the forecast about what this adoption will happen then it will be for the best of the country but repercussions may follow if it fails.
In conclusion, the adoption will change money movement in the country and how banks used to handle Bitcoin. All the best for the adoption.