Since today, Bitcoin is the official currency of El Salvador, along with the US dollar, after that Central American country became the first to accept cryptocurrency as legal tender. Three minutes before midnight local time, President Naid Bukele tweeted that the country is about to “go down in history” with this move, after previously confirming that it had acquired 400 bitcoins, equivalent to roughly $ 20.9 million at today’s prices.
Proponents of the move argue that it will be cheaper and easier for migrants to send money home to El Salvador, which is very important given that such remittances account for more than 24% of the country’s gross domestic product, according to the World Bank. There are also hopes that the move could improve citizens’ access to financial services. The CEO of Strike, a digital finance company that helped with the logistics of the new law, said more than 70% of the country’s “active population” currently do not have a bank account.
3 minutos para hacer historia.
— Nayib Bukele 🇸🇻 (@nayibbukele) September 7, 2021
El Salvador has been preparing to support the cryptocurrency for several months. In August, 200 ATMs began to be installed across the country, in which citizens can make exchanges between the country’s two official currencies. It also launched its own digital wallet called Chivo, which provides users with $ 30 in bitcoin to encourage cryptocurrency adoption.
But there are fears that adopting such a historically volatile currency could hurt the Salvadorans and threaten economic stability. Bitcoin hit an all-time high of over $ 60,000 in April, and then lost almost half of its value in the summer as a result of the crash. The law contributed to the decision of the rating agency Moody’s to downgrade El Salvador’s debt rating, and the IMF also warned of its potentially destabilizing impact.
The law means that citizens will be able to pay taxes in bitcoin, and shops will be able to quote prices in digital currency. Money exchanged for this currency will also not be subject to capital gains tax. The move makes El Salvador the first country to officially have Bitcoin on its balance sheet and hold it as part of its reserves.