El Salvador became the first country to adopt Bitcoin as legal tender Tuesday, allowing Salvadorans to use the cryptocurrency to purchase goods and services.
President Nayib Bukele officially announced the adoption of Bitcoin as a national currency in a press release late Monday, tweeting that the country had bought its first 400 bitcoins.
“Tomorrow, for the first time in history, all the eyes of the world will be on El Salvador. Bitcoin did this,” Bukele said.
The country passed legislation in June approving the currency as valid legal tender and requiring all businesses to accept bitcoin as legitimate payment if they have the technology to do so. Under the law, El Salvador will continue to use the U.S. dollar alongside Bitcoin and the exchange rate between the two currencies will be determined by the market.
The country will also give each citizen $30 worth of bitcoin through a digital wallet called “Chivo” in an effort to promote adoption, and allow citizens to withdraw their bitcoins through ATMs.
The adoption of Bitcoin as a national currency was motivated in part by El Salvador’s reliance on remittances, according to Bukele. Since Bitcoin allows for the exchange of money without a middleman guaranteeing the contract and collecting transfer fees on remittances, Bukele said adopting the cryptocurrency would save billions of dollars previously lost to financial intermediaries.
Tomorrow, for the first time in history, all the eyes of the world will be on El Salvador.#Bitcoin did this.#BTC🌎🇸🇻 https://t.co/h3zO2COYmb
— Nayib Bukele 🇸🇻 (@nayibbukele) September 6, 2021
“By using #Bitcoin, the amount received by more than a million low income families will increase in the equivalent of billions of dollars every year,” Bukele said. “This will improve lives and the future of millions.”
Bukele also said the move would include more Salvadorans in the financial system. (RELATED: House Lawmakers Set To Square Off With White House, Treasury Department Over ‘Stifling’ Crypto Tax Plan)
“Financial inclusion is not only a moral imperative, but also a way to grow the country’s economy, providing access to credit, savings, investment and secure transactions,” he said.
Many criticized El Salvador’s decision, worrying that Bitcoin’s volatility could threaten the Salvadoran economy.
“Domestic prices could become highly unstable,” International Monetary Fund general counsel Rhoda Weeks-Brown and director of monetary and capital markets Tobias Adrian wrote in a blog post. “Even if all prices were quoted in, say, Bitcoin, the prices of imported goods and services would still fluctuate massively, following the whims of market valuations.”
Cryptocurrency advocates, on the other hand, praised the move as forwarding Bitcoin’s global adoption.
“It’s a pretty monumental step in the evolution of bitcoin,” Garrick Hileman, head of research at cryptocurrency firm Blockchain.com, told The Wall Street Journal.
“We call it B-Day, because we are very eager to see how the ecosystem develops,” José Luis Guillén, founder of currency exchange Coincaex, told the WSJ.
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