Bitcoin to become legal tender – but not compulsory
According to El Salvador’s President Nayib Bukele, using BTC will be optional for citizens. The vendors, though, will have to accept the coin alongside the US dollar, which has been the state currency here since 2001. Compensations – such as pensions and salaries – will still be paid out in dollars.
The state will encourage Salvadorians to try the new technology by offering them wallets pre-loaded with $30 worth of BTC, educating them on digital currencies, and eliminating capital gains tax on crypto. To ease the transition, Athena Bitcoin will install around 1500 Bitcoin ATMs across the country, while BANDESAL bank will guarantee on-the-spot convertibility to dollars through a $150 million trust.
How Bitcoin is helping El Salvador’s economy
So how come El Salvador decided to make such a bold move? First, more than two-thirds of the country are seriously underbanked. Second, a large number of citizens rely on remittances from their relatives who are working abroad; for one, in 2019 the volume of those almost reached $6 billion.
With the fees eating away this hard-earned money, the government was searching for a way to cut the transaction costs. And lastly, adopting Bitcoin as a legal tender is likely to give a boost to the economy: it has already started to draw the attention of investors, startups, and tourists with BTC in their accounts.
Reaction to legalized Bitcoin
Bitcoin enthusiasts and professionals alike expect the country to turn into the biggest ever sandbox for crypto very soon. A number of projects from the field already expressed their desire to help El Salvador in the adoption process, and test their own economical models.
Bukele took into account the recent controversy over the sustainability of Bitcoin, too, as he announced the plans to use the country’s geothermal potential for building mining facilities powered by clean energy.
The precedent has been made. Do you think other countries will follow El Salvador?