Today September 7, El Salvador’s Bitcoin Law has officially come into effect three months after its parliament passed the historic vote. The Central American nation is now the first country to recognize Bitcoin (BTC) as legal tender.
El Salvador President Nayib Bukele tweeted:
“3 minutos para hacer historia — In 3 minutes, we make history.”
The internet money that started in a cryptography mailing list is now officially recognized by a nation-state as lawful monetary good, being put in the same national status as the dollar in El Salvador. Starting today, any Salvadoran will have the legal option to use bitcoin instead of dollars, increasing their sovereignty over their finances and the financial certainty over their savings.
Stimulus to the economy
The use of bitcoin seeks to encourage the economy that, since its dollarization in 2001, has been stagnant with an average growth of between 2 and 4%. In 2020 it contracted 7.9% due to the covid
-19 pandemic. It is projected that this year it will grow over 9%.
The daring measure, according to the government, will contribute to the banking of the unbanked population and will prevent the loss of some 400 million dollars in commissions for remittances that Salvadorans send from abroad through financial entities.
Diaspora shipments represent 22% of GDP. “All the eyes of the world will be on El Salvador,” said the president.
The Bukele government, which has a large majority in Parliament, set aside $203 million from the budget for its plan. This amount finances the automatic convertibility of bitcoin to dollar, with an exchange rate “established by the market”.
The law obliges “every economic agent” to “accept bitcoin as a form of payment when it is offered to him by whoever acquires a good or service.”
The government clarified that if the commercial establishment does not want to receive bitcoins in its account, the “Chivo” application has the option to immediately convert the amount to its equivalent in dollars at the time of the transaction.
“Nobody is obliged to use it, so it must be remembered that the dollar is the reference currency for prices, wages and the country’s accounting records,” the government has clarified.
What this Central American country of 6.6 million inhabitants is seeking, according to Bukele, is “to break with the paradigms of the past” because “El Salvador has the right to advance towards the first world.”
The government yesterday announced that they had bought the first 200 BTC as a country, which then followed by another purchase of 200, now total of 400 BTC.
While the move marks a world-first, going live didn’t go exactly as smoothly as planned.
Bukele tweeted on Monday morning, however, that the Chivo digital wallet the government had set up for citizens to use had been temporarily disabled. “The system is offline while the capacity of the servers is being increased,” Bukele tweeted, while asking for “a little bit of patience.”
A popular president
A recent survey by the Central American University (UCA) revealed that seven out of 10 Salvadorans indicated that they “disagree or strongly disagree” with the use of bitcoin and that they preferred in dollars. Although the popularity of the ruler exceeds 80%, according to the same university.
“The president maintains popularity because the people for whom the government, which are the masses, have not yet been affected by the measures he has taken,” explained Domingo, the director of the communications school of the private Technological University (UTEC). Alfaro.
Bukele, a 40-year-old millennial, who often appears in public wearing an inverted cap and interacts with influencers on social media, has capitalized on discontent against the traditional parties Arena (right) and FMLN (ex-guerrilla, left), several of whose members are prosecuted for corruption.
Last week, a chamber of the Supreme Court appointed in May by the Congress related to Bukele, gave the green light for him to run for reelection. His current government ends in 2024.
Source: El Salvador Becomes The First Country In The World To Adopt Bitcoin – Fintechs.fi