Historical! El Salvador becomes first country to make Bitcoin its official currency

By Amirtha P S, Desk Reporter
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El Salvador has become the first country in the world to accept Bitcoin as legal tender, despite widespread skepticism and warning from international regulatory bodies regarding the risks for consumers. 

“Tomorrow, for the first time in history, all the eyes of the world will be on El Salvador. Bitcoin did this,” El Salvador’s President Mr. Nayib Bukele tweeted last day. The government claims that the move will give many Salvadorans access to bank services for the first time and save nearly $400 million in fees on remittances sent home from abroad every year.

Last day, Mr. Bukele announced that El Salvador had bought its first 400 Bitcoins, in two tranches of 200, which skyrocketed the price of the cryptocurrency. The Bitcoins were trading at around $21 million, according to the cryptocurrency exchange app Gemini.

However, a recent opinion poll shows that Salvadorans are skeptical about using Bitcoin, wary of the volatility of the cryptocurrency that critics say could increase regulatory and financial risks for financial institutions. The survey found that the majority of the country’s 6.5 million population rejects the idea and will continue using the US dollar.

In June, El Salvador’s parliament approved a law to allow the crypto money to be accepted as tender for all goods and services in the Central American nation, along with the US dollar. The bill, an initiative of Mr. Bukele, was approved within 24 hours of being presented to Congress, where the president’s allies have held a majority since March.

Since then, economists and international bodies such as the World Bank, International Monetary Fund and Inter-American Development Bank have expressed concerns about El Salvador’s Bitcoin adoption.

Nearly two-thirds of Salvadorans questioned for the poll said they had no interest in downloading the “Chivo” electronic wallet that will allow users to buy and spend Bitcoin.

Mr. Oscar Cabrera, an economist at the University of El Salvador, said the currency’s high volatility will have a “negative impact” on consumers, affecting the price of goods and services.

For its part, the Salvadoran Foundation for Economic and Social Development (FUSADE) said it was “unconstitutional” to make it compulsory for merchants to accept Bitcoin as a form of payment.

The US has also urged El Salvador to ensure a regulated, transparent and responsible use of Bitcoin, and to protect itself from malign actors such as hackers seeking ransom money.

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