Central American country El Salvador has officially become the first country to adopt Bitcoin as a legal tender. The country will accept flagship cryptocurrency Bitcoin alongside its official currency – the United States dollar. This means that Bitcoin will now be accepted as a satisfactory payment for any monetary debt.
In June 2021, the Central American country announced that it would be introducing Bitcoin into its mainstream economic system. In a video broadcast, El Salvador’s President – President Nayib Bukele, announced that El Salvador was partnering with Strike, a digital wallet company, to build the country’s modern financial infrastructure using blockchain technology.
This announcement has been met with different reactions from global experts, all of which have expressed concern about the potential outcome of the decision, most of which are skeptical about the move and believe that cryptocurrency is too unstable and too risky to be used as mainstream tender.
The risks outlined by some economic experts have even prompted several El Salvador citizens to take to the streets in protest against the adoption of Bitcoin as an official currency. The World Bank also warned against the move, while some analysts have described it as an “attention-seeking move” from an “authoritative regime”.
Amid global criticism and scepticism, Nigel Green, the Chief Executive and founder of deVere Group, a financial services giant, has described El Salvador’s move as ground-breaking in terms of greater adoption of Bitcoin. “El Salvador is making history with a bold jump into the future of money by officially recognizing Bitcoin as legal tender together with the US dollar,” he said.
According to him, El Salvador’s reliance on the U.S dollar to complete transactions comes with its own set of, often very costly, problems. One of which is that the El Salvadoran government cannot print its own money and the economy cannot benefit from the U.S. Federal Reserve’s money-printing agenda. Therefore, El Salvador must either borrow or earn the dollar it needs.
He explained that countries that adopt cryptocurrency as a legal tender have a currency that isn’t influenced by market conditions within their economy, nor directly from just one other country’s economy, and said that El Salvador’s adoption of Bitcoin could cut the cost of remittances, a major source of income for millions of people.
Nigel Green added that by diversifying the nation’s dollar reserves into Bitcoin, there could be additional opportunities for El Salvador to increase the size of its reserves; the country could benefit from significant investment and capital inflows as digital asset organizations are likely to relocate to the Bitcoin-friendly state.
Should El Salvador’s adoption of Bitcoin as a legal tender prove to be a success, it will likely result in other countries’ adoption of cryptocurrencies. “Due to their similar reliance on remittances, amongst other factors, other nations, including Panama, Guatemala, and Honduras, could also adopt Bitcoin should the process in El Salvador run smoothly and there’s greater economic growth, stability, and levels of financial inclusion as a result,” Nigel Green said.
The move has attracted global attention to the nation, with many nations eager to see the outcome of El Salvador’s decision as it seemingly takes the lead in the evolution of digital currency.