Bitcoin is now an official currency of El Salvador – here’s what that means
All businesses will be required to accept the cryptocurrency.
El Salvador now has a second national currency, as it adopts Bitcoin alongside the US dollar. That’s after months of preparation after the country passed the “Bitcoin Law” back in June of this year.
Part of that preparation involved the government buying 400 Bitcoins, worth around $21 million with the current pricing. Seen as a solution for the low adoption of bank accounts in El Salvador, Bitcoin will make it easier for ex-pats to send money back to family, or to spur economic growth in the country.
If you’re wondering how sending money back to family is going to help, we’ve got the skinny. Currently, 24-percent of the country’s gross domestic product is made from such transactions. By using Bitcoin, the government hopes that more of that money will end up in the buying power of the population, and not be swallowed up by bank fees.
Only thirty percent of the country has a bank account, so improving access to financial tools is a necessary step for the country’s growth.
While the Bitcoin Law is praised by cryptocurrency fans, it might not be the right move long term. Moody’s downgraded El Salvador’s debt rating in response, and the IMF has some issues about the destabilization effects of an inherently volatile currency.
With El Salvadorians now able to do things like pay taxes in Bitcoin, as well as all shops being required to accept it, the eyes of the world will be watching what could be an important test case for cryptocurrency’s mainstream adoption.
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