By now, most of us must have heard about Bitcoin and cryptocurrency. What is bitcoin? According to its website, bitcoin uses peer-to-peer technology to operate with no central authority or banks to manage transactions. The issuing of bitcoins is carried out collectively by network nodes.
Amid uncertainties, El Salvador has become the first country to make bitcoin a legal tender from September 7, 2021. The government has also set up a national digital wallet known as ‘Chivo’, which translates ‘Cool’ in English. Citizens can sign in to the wallet. The government is giving $30 in bitcoins to those who make use of the wallet. Foreigners who invest three bitcoins in the country, which is equal to $140,000, will be granted residency. Currently, El Salvador uses the US dollar as its currency.
Being the first country to open its doors completely to bitcoin, the South American country feels that it will help boost its economy. President Nayib Bukele said he believes this will encourage investors with cryptocurrency to spend more of it in his country. The president even has big plans. He wants El Salvador’s state-run geothermal utility to use energy from the country’s volcanoes to mine bitcoin.
There are doubts about the adoption of bitcoin in El Salvador. The $30 given to citizens who join the cryptocurrency craze will stimulate the economy. But the overall impact will likely be a short-term boost. For instance, in other countries, similar impacts like COVID-19 stimulus payments, ended after people have spent the money. It’s also unsure if El Salvador’s debt-ridden government can even afford it.
It’s not clear if the new Bitcoin law in El Salvador means that all private businesses should accept bitcoin. In its original law, passed in June 2021, it said that “every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.” But this led to protests and scepticism. After this, El Salvador President Nayib Bukele had tweeted in August that businesses did not have to accept bitcoin.
Experts feel that it will take many years for the widespread adoption of bitcoin. El Salvador has been installing 200 bitcoin ATMs to allow people to convert cryptocurrency into dollars. Only 30% of the country’s population even has a bank account. The US dollar will still be used in El Salvador for a long time, even if its president wants to move toward bitcoin.
Another piece of news is that Panama is planning to legalise bitcoin soon.
