How do you see Bitcoin becoming legal tender in El Salvador?

What do industry insiders think?

How do you see Bitcoin becoming legal tender in El Salvador?

On June 9, according to foreign media sources, the Legislative Assembly of the Republic of El Salvador voted by an absolute majority to pass the bill for bitcoin to become legal tender in the country.

The news immediately stirred up a thousand waves in the cryptocurrency world and was considered the biggest positive for bitcoin this year.

However, some industry insiders pointed out to Blockchain Daily that bitcoin has been proven to have no monetary function and even little payment function due to its too volatile and more commodity attributes, and is at best an investment variety. The fact that a small country in El Salvador set it as legal tender is iconic, but the benefits are limited and need not be read too much into it.

Bitcoin Bill Passes
El Salvador’s involvement in bitcoin dates back to March of this year. That’s when cryptocurrency wallet Strike launched its mobile payment app in El Salvador, which quickly became the number one downloaded app in the country.

At last weekend’s Bitcoin 2021 conference, Salvadoran President Nayib Bukele announced a partnership between El Salvador and digital wallet Strike to develop the country’s modern financial infrastructure using bitcoin technology.

At the same time, Nayib Bukele pledged at the conference to submit a draft bill to the country’s legislature that would make Bitcoin legal tender in El Salvador.

According to the third, fourth and seventh articles of the “Bitcoin Bill of the Republic of El Salvador” news, prices can be denominated in bitcoin, taxes can be paid in bitcoin and must be accepted when a person who obtains goods or services offers him bitcoin for payment.

On June 9, according to foreign media sources, the Legislative Assembly of the Republic of El Salvador voted by an absolute majority to pass the bill. This means that Bitcoin becomes legal tender in the Republic of El Salvador, and the bill will take effect ninety days after it is published in the Official Gazette.

It is understood that before the bill officially takes effect, the Republic of El Salvador will guarantee automatic and immediate exchange of bitcoin by establishing a trust fund at the Banco de Desarrollo de El Salvador (BAND).

Once the news came out, a large number of cryptocurrency players cried out in favor. Among them, Jiang Zhuoer, CEO of Lepit Mining Pool, wrote on social media that in the long run, this is the biggest positive for bitcoin this year, surpassing short-term funding benefits such as the passage of the US bitcoin ETF and Apple’s purchase of bitcoin.

Iconic, but limited benefit
According to the Ministry of Foreign Affairs, the Republic of El Salvador is located in northern Central America and ended its civil war in 1992. 2019 statistics, the country has a population of 6.7 million. It is mainly agricultural and has a weak industrial base. Economic growth has been slow in recent years due to the international economic and financial crisis. 2019 GDP: $26.75 billion, GDP per capita: $3,941.88.

At the beginning of the 21st century, hyperinflation of the former legal tender, the colón, brought about a significant devaluation and El Salvador decided to adopt the U.S. dollar as its official currency, leading to the current dominance of the U.S. dollar in El Salvador

Foreign trade accounts for more than half of the country’s GDP. The main exports are coffee, cotton, sugar, shrimp, textiles, etc. El Salvador is still a predominantly cash economy, with about 70% of the population not having a bank account or credit card. Remittances or money sent home by migrants account for more than 20% of the country’s gross domestic growth.

Chen Xiaohua, director of the Blockchain Professional Committee of the China Mobile Communications Federation, told Blockchain Daily that the reason El Salvador has made bitcoin legal tender may lie in its concerns about its own monetary system, and that the unprecedented global monetary expansion since the second half of 2020, especially the massive printing of money by the Federal Reserve, is highly likely to destroy dollarized emerging markets like El Salvador in the future. The inclusion of bitcoin in the currency circulation may be a new way out, as the supply of bitcoin is not controlled by any central bank and will greatly reduce the impact of El Salvador’s fiscal power on U.S. monetary policy.

Cai Kelong, a senior researcher at the Institute of Financial Technology at Renmin University of China, told Blockchain Daily that it is certainly good news for bitcoin that a country can use it as a fiat currency, but one needs to look at this matter calmly and not read too much into it, as the Republic of El Salvador is a small country that just wants to find a currency system other than the U.S. dollar.

Cai Kelong also pointed out that previously Japan also passed the Cabinet Office Order on Virtual Currency Exchange Operators in 2017, announcing that it would officially recognize Bitcoin as a legal payment method starting April 1, 2017, and that goods could also be accepted for payment in Bitcoin.

“It was also a breeze in the cryptocurrency world at the time, and a big financial country like Japan is a world away from El Salvador than that.” Cai Kelong stressed that bitcoin has been proven to have no monetary function due to its high volatility, and even the function of payment is very little, bitcoin is at most an investment variety with stronger commodity properties.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-do-you-see-bitcoin-becoming-legal-tender-in-el-salvador/
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