El Salvador recently passed a law that will make them the first nation in the world to adopt Bitcoin as legal tender. The law was approved by Congress after it was introduced by President Nayib Bukele. The president backed the move saying that it would promote “financial inclusion” economic development and investment.
Bukele had first announced the bill at a conference in Miami last week. “This will generate jobs and help provide financial inclusion to thousands outside the formal economy, and in the medium and long term we hope that this small decision can help us push humanity at least a tiny bit into the right direction,” he said.
He was then able to pass it into law with 62 out of 82 voting for the bill. The President enjoys a lot of power in congress as his party occupies the largest number of seats.
The law allows citizens to use Bitcoin to buy goods and services, pay debts, and even pay taxes. While the digital coin will official become legal tender within three months, the President announced that El Salvador will still retain the US dollar as an option. However, he added that he wanted El Salvadorians to start thinking about money in terms of Bitcoin and not dollars. The US Dollar will instead be used as “a reference currency for accounting” while citizens will be able to convert between Bitcoin and USD at any time.
Bukele, 39, is a known techno-enthusiast. He even added the pro-cryptocurrency “laser eyes” to his Twitter profile picture. He said that the new law would make it easier for El Salvadorians living in foreign countries to send money back home. The total foreign remittances back home, $6 billion, accounts for a fifth of the nation’s GDP.
This move has however met quite a bit of criticism.
The Director of the Human Rights Institute at the University of Central America, Father José María Tojeira, pointed out that only very few Salvadorians would have the technical capacity to access and use the digital coins.
“The decision is rather incomprehensible. It seems more about making a show – which is a characteristic of this government: lots of propaganda, but few structural changes to help the impoverished population,” he said.
Economists Carlos Carcach, highlighted the currency’s high volatility saying that investors would “run the risk of becoming rich and being poor the next day.” He however added that “as long as there is someone who accepts payment with bitcoin, the same as they accept dollars, there wouldn’t be problems”.
The central American Nation will now be watched closely all around the world. It would act as a good testing ground to determine if it can really be the world’s currency.
“This could be a key catalyst for bitcoin over the next two to three years,” said Richard Galvin of crypto fund Digital Asset Capital Management.