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Is it cool to adopt cryptocurrency as legal tender? El Salvador thinks so.On Tuesday, this small Central American country became The first in the world to adopt Bitcoin As the official currency. Taxes can be paid in cryptocurrency, and if merchants have the technology, they must accept it along with the U.S. dollar, which has been the national currency since 2001.
With the support of a $150 million government fund, the ATM network will allow users to convert Bitcoin into U.S. dollars for free. Salvadorans will receive $30 for free in a digital wallet called Chivo-“cool” in local slang.
The dictatorship of El Salvador, Nayib Bukele, believes that this will promote foreign investment and make it cheaper for foreign Salvadorans to send billions of dollars in remittances home. The haste of the project is extraordinary. Buckler announced the plan in early June. Three days later, his supporters in Congress passed a brief law late at night allowing Bitcoin to be adopted within 90 days.
Encryption enthusiasts are excited about Bukele’s boldness.A movement on social media Invite supporters to buy $30 in Bitcoin Collective support for El Salvador’s move on Tuesday. Promoters of Bitcoin hope that other developing countries will follow Bucker’s example.
Salvadorans are not so happy. Opinion polls show that the vast majority of people oppose this idea. This may reflect the fear of the unknown: According to a survey, less than 5% of people understand Bitcoin. But citizens are also worried about paying in currencies worth between US$10,000 and US$63,000 in the past year.
The international financial community opposed the plan.The International Monetary Fund has Warning against adopting cryptocurrencies As legal tender, it cited risks to macroeconomic stability, financial integrity, consumer protection, and the environment (the creation of Bitcoin consumes a lot of electricity).
The World Bank rejected a request to advise El Salvador on the Bitcoin issue. Moody’s has further downgraded the country’s debt rating to junk. As investors were concerned about this move, the yield on El Salvador’s long-term government bonds jumped to nearly 11% last month.
El Salvador’s move seems strange because the country has not suffered the currency turmoil of abandoning fiat currencies as described by cryptocurrency fans. Quite the opposite: Since adopting the dollar 20 years ago, this Central American country has enjoyed low inflation and economic stability.
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Financial inclusion is an often touted benefit of Bitcoin, and new banks will definitely get better services by encouraging fintech. Their proliferation in Latin America is helping people without bank accounts access financial services and reduce the cost of remittances without any risk or pollution caused by cryptocurrencies.
Critics of Booker suspect there are other motives. The 40-year-old leader’s fashionable enthusiasm for Bitcoin has effectively distracted people from the recent widespread condemnation of moves that caused the Supreme Court to be widely condemned and granted him permission for the second consecutive year in 2024. Term of office verdict.
The Bitcoin strategy may also become a horse in the long-term plan to replace the U.S. dollar with a local stablecoin, a cryptocurrency whose value is backed by external assets.
Regardless of Booker’s motives, it is difficult to see a good end to the experiment. El Salvador’s hasty adoption of Bitcoin is full of risks, and ordinary citizens may pay a heavy price for the president’s gambling. This is not against innovation: Central Bank Digital CurrencyFor example, if it is implemented carefully, there will be great hopes. But as a government-backed legal tender, Bitcoin is not cool.