El Salvador Officially Adopts Bitcoin as Its Currency

Bitcoin is now an official currency of El Salvador alongside the US dollar after the country became the first to accept the cryptocurrency as legal tender.

lifestyleug.com__El Salvador has adopted Bitcoin official currency (1)
CNBC notes that El Salvador is now the first country to officially own Bitcoins and to hold them as part of their reserves. PHOTO via @Entrepreneur

KAMPALA | LIFESTYLE UGANDA (https://lifestyleug.com/) — As of today, Bitcoin is El Salvador’s official currency alongside the US dollar, after the Central American nation became the first to adopt cryptocurrency as legal tender.

The country’s populist president Nayid Bukele tweeted three minutes before midnight local time that the move would “make history”: he previously confirmed that 400 Bitcoins were purchased, which at today’s prices would equal around $20.9 million.

CNBC reports that the move is increasing remittances to El Salvador, which accounts for 24 per cent of the country’s gross domestic product based on data from the World Bank. Advocates of the move argue that migrants will be able to send money home more easily and cheaper.

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Additionally, the move could improve citizens’ access to financial services. According to the CEO of Strike, a digital finance firm that helped with the logistics of the new law, more than 70 per cent of the country’s “active population” do not have a bank account.

However, the adoption of a historically volatile currency would be unwelcome in El Salvador, putting economic stability at risk, as Bitcoin hit an all-time high of $60,000 in April, before losing nearly half its value in a summer crash.

According to The Financial Times , this law contributed to a downgrade of El Salvador’s credit rating by rating agency Moody’s, and the IMF has also expressed concern for its destabilizing impacts.

Under the law, citizens, residents, and merchants will be able to pay taxes in Bitcoin, and digital currency price listings will be allowed at stores. Money exchanged into the currency will not be subject to capital gains tax.

The move makes El Salvador the first nation to hold Bitcoin on its balance sheet and bank account, reports CNBC.

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In June, after passing the law to support cryptocurrency , El Salvador began installing 200 ATMs across the country to allow citizens to convert between the country’s two official currencies. It is also launching a digital wallet called “Chivo” that will offer users free Bitcoin for 30 days.

However, anecdotal evidence suggests few businesses are ready for the change. The Financial Times surveyed more than 20 companies in the capital and discovered that only three had immediate plans to accept the currency.

According to CNBC, many Salvadorans either hadn’t started their preparations or were actively opposed to accepting Bitcoin as legal tender. A survey conducted by the Central American University found that 70 per cent disagreed with the concept.

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