Why El Salvador is making Bitcoin legal tender

Making bitcoin a legal tender sounds a bit of a pipe dream. But at the urging of President Ibu Buclair, El Salvador has become the first country to take the plunge.

Why El Salvador is making Bitcoin legal tender

By Silinwe

For the first time, Bitcoin has become legal tender in a country.

On June 9, the Salvadoran Congress passed a bill by a margin of 62 votes to 22, making bitcoin one of the legal currencies in the country.

The bill was submitted to Congress by the President of the Republic of El Salvador, Nayib Bukele, and the proposal states, “The purpose of the law is to regulate Bitcoin as an unrestricted legal tender, giving it free power and unrestricted access to any transaction and any public or private, natural or legal person that has ownership rights.”

Globally, Bitcoin is not popular in most regions of the world. It is not controlled by anyone, its non-central bank issuance makes it naturally unrecognizable by governments, and central banks are developing their own digital currencies.

Making bitcoin a legal tender sounds somewhat of a pipe dream. But with President Ibu Buclair’s push, El Salvador has become the first country to take the plunge.

Ibu Buclair is a “netroots president.

El Salvador’s President Ibu Buclair is 40 years old and was sworn in on June 1, 2019 for a five-year term, making him the youngest head of state in Latin America.

Such youth also means a shallow political history, having previously served as mayor of Nueva Cuscatlán (2012) and San Salvador (2015).

But similar to former U.S. President Donald Trump, Ibu Buclair also likes to “tweet to rule” and has been in the public spotlight for his frequent use of Twitter to “get to work” in his first week in office.

In September 2019, Ibu Buclair attended the United Nations General Assembly for the first time on behalf of El Salvador, and before giving his speech, his first action was to take out his phone and take a selfie of himself.

His party, the Grand Coalition for National Unity, is made up mostly of young people, and according to a Salvadoran netizen abroad, Ibu Buclair fired the country’s attorney general and five other corrupt magistrates early in his term.

Within just one month of taking office, El Salvador’s Congress approved new education and infrastructure financing plans and passed a series of bills to ensure that capitalists who used to bribe politicians at will are restrained.

Under the new president, Ibu Buclair, El Salvador appears to be alive and well. But before that, El Salvador was one of the most underdeveloped regions on the planet.

Gangs and violence had been the country’s biggest impression, most recently in the news when Fox reported on May 23 that Salvadoran police had found a mass grave with dozens of women’s bodies in the backyard of the home of a man who was also a former police officer.

And according to publicly available information, El Salvador is a coastal country located in northern Central America and is the most densely populated country in Central America. The country has a land area of 20,720 square kilometers.

As of 2019, the country has a total population of 6,705,000, nearly a third of which is concentrated in the capital city of San Salvador. The country’s economy is mainly agricultural, producing mainly coffee beans and cotton, and is one of the world’s “low and middle-income countries”.

In 2020, El Salvador’s nominal gross national product was $31.202 billion, ranking 98th in the world, about half of that of the Macau Special Administrative Region.

In 2012, the government created a new special forces unit to combat the vicious street gangs. With years of civil war, its peace is hard-won and fragile.

Knowing the basics of El Salvador, it is easy to guess why it has adopted bitcoin as legal tender.

First of all, El Salvador does not issue its own sovereign currency, and has always settled in U.S. dollars, which are issued and regulated by the Federal Reserve.

As an underdeveloped region, about 70% of Salvadorans do not have bank accounts or credit cards. The Salvadoran economy is heavily dependent on migrant remittances, which account for more than 20% of the country’s GDP.

These international transfers rely on third-party financial institution services and must be vetted by the Bank for International Settlements, and the high cost of fees and time makes it possible for Bitcoin to become legal tender in El Salvador.

Recently, the 2021 Bitcoin Conference was held in the United States and eyes were drawn within the cryptocurrency space. El Salvador’s President Naib Boukry was quick to take advantage of this wind.

On June 6, he tweeted that bitcoin currently has a market cap of $680 billion and that if one percent of bitcoin could be attracted to El Salvador, the country’s GDP would grow by 25 percent.

In an effort to attract foreign investment, on June 9, Nayib Bukele said El Salvador would grant permanent residency to investors who invest more than three bitcoins. The country will set up a trust fund to reduce the risk of investors buying bitcoins.

Bukele also said that the Salvadoran government will introduce bitcoin wallets to citizens, but that citizens will still have the freedom to choose their wallets. In addition, Bukli said the initiative does not mean that El Salvador is “de-dollarizing” and that both the U.S. dollar and bitcoin are legal tender.

The move comes after El Salvador announced that it will partner with digital wallet company Strike to build the country’s modern financial infrastructure using bitcoin technology.

Strike founder Jack Mallers said that as Bitcoin continues to expand its influence globally, it will be transformative, transformative in that Bitcoin is both the largest reserve asset ever created and a superior monetary network, and that holding Bitcoin provides a way to protect developing economies from the potential impact of fiat currency inflation.

Details on how El Salvador’s vision for bitcoin will work have not yet been released, but according to CNBC, El Salvador has assembled a bitcoin leadership team to help build a new financial ecosystem based on bitcoin.

President Ibu Buclair has spared no effort in advocating for El Salvador, and the wonderful elements of ocean views, beaches and tax havens coupled with bitcoin have become his killer app, but there are still many challenges to whether bitcoin can afford to be used as legal tender.

For example, can the huge volatility of bitcoin prices meet the long-standing demand of Salvadoran nationals for foreign exchange? Can technologies such as the lightning network support the ease of bitcoin’s experience in everyday payments?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-el-salvador-is-making-bitcoin-legal-tender/
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