As of 7th of September 2021, El Salvador has officially declared its recognition of Bitcoin as official currency, making it the first country in the world to adopt cryptocurrency as legal tender.
“In 3 minutes, we make history,” the Central American country’s president Nayid Bukele announced via Twitter before midnight.
In an earlier tweet the same day, President Bukele confirmed the country’s purchase of a total of 400 Bitcoins, worth about $20 million in most recent prices. This puts Bitcoin alongside the US dollar as official currencies in El Salvador. The Bitcoin Law was approved by El Salvador’s Legislative Assembly in June after the country’s Financial Commission ruled the bill favorably.
Through the Development Bank of El Salvador, the state guarantees automatic convertibility of Bitcoin into US dollars and back. Although this does not mean that the virtual currency will completely replace the dollar as the country’s current legal tender, it can now be used to pay for goods and services, including bills and tax payments.
The country will be handling transactions in partnership with digital finance company Strike, according to President Bukele. In preparation, officials started installing 200 Bitcoin ATMs all over the country last August, allowing tax-free conversion of Bitcoin to cash. 50 financial branches will also be put in place across the country for cash withdrawals and deposits.
To further encourage the cryptocurrency’s adoption, the country has also launched its own state-sponsored digital wallet called “Chivo”, which includes a free Bitcoin incentive worth $30.
Supporters say that this motion could benefit El Salvador’s economy by lowering remittance fees and making transactions easier for overseas workers sending money back into the country. According to a World Bank study, migrant remittance makes up a significant 24% of the country’s GDP. In addition, it can also provide financial inclusion to the 70% of the country’s population who currently have no bank accounts.
But a week after its roll out, Salvadorans took to the streets in protest against the new Bitcoin Law. Protestors from various political and social affiliations gathered in the capital city of San Salvador on the 15th of September, as the country commemorates its independence day.
Thousands of demonstrators marched in protest, carrying large banners and signs opposing the implementation of the new law and conveying anger against President Bukele’s alleged unconstitutional policies.
The day after Salvadoran president’s Bitcoin rollout, Panamanian Congressman Gabriel Silva followed suit and proposed a similar bill designed to recognize cryptocurrency as Panama’s legal tender. Silva also made the announcement on Twitter, explaining that the bill aims to make Panama “a country compatible with blockchain, crypto assets and the internet.” The congressman also added that the bill “has the potential to create thousands of jobs, attract investment and make the government transparent.”
With El Salvador’s not-so-smooth national Bitcoin roll out, along with Panama’s unveiling of similarly designed crypto bill following immediately after, are we observing the beginnings of what could possibly be a global financial trend? If Panama’s government decides to pass the bill into law, the two neighboring countries will provide an interesting case study into the future of cryptocurrency.