El Salvador has approved a law that will make it the first country in the world to accept Bitcoin as legal tender
The Central American country now recognizes Bitcoin (in addition to the US Dollar) as an official currency for the exchange of goods and services.
And it is a huge step forward to introduce this innovative digital currency as an official method of payment.
Why is this a big deal?
The law will potentially create jobs and provide financial inclusion to people who would otherwise be left out of the formal economy because they do not have bank accounts (which is about 70% of the population).
It could also attract investments which will increase the market cap of the country.
There has been a lot of ‘hype’ around cryptocurrency in the past couple of months and with the ‘hype’ comes critics as well.
Some financial analysts will classify bitcoin as an investment rather than a currency due to its volatile nature. Others make the point that Bitcoin is difficult to regulate which makes it a viable option for criminal activities, including money laundering.
How will it work?
Citizens of El Salvador can sign up and load bitcoins onto a digital wallet, called Chivo.
Users can configure Chivo to make payments either in bitcoin or their dollar equivalent. They’ll be required to verify their account with an ID.
Cash deposits and withdrawals can be done at any of the 200 Chivo ATMs across the country.
Is El Salvador ready?
A regular person can carry cash around, in their pocket, wallet or wherever they keep their cash. With cryptocurrencies, you need some type of electronic device- a phone, a tablet, a laptop.
In the case of El Salvador and a number of other countries, access to the necessary tech will prove to be one of the main barriers to the new crypto state.
In a bid to increase the adoption of Bitcoin in the country, Chivo, (El Salvador’s official e-wallet app for Bitcoin) gives $30 in Bitcoin for every signup.
The first few days have been filled with tension and worry as users struggle to adjust
What are the hurdles?
The country’s official digital wallet app, Chivo was not available on Google Play and App Store in the early hours.
Most local businesses aren’t accepting it yet. Some think that Bitcoin is a scam. Others don’t think it’s real money.
Some citizens complained that the app was slow.
What can you pay for with Bitcoin?
In El Salvador, you can pay for anything with bitcoin- from haircuts to food.
Will the USD be scraped?
No, Bitcoin will be used alongside the US Dollar.
Will there be more crypto-states?
Many cities and states in different countries have been experimenting with Bitcoin and how it can be integrated into their respective economies. However, El Salvador is the biggest by far.
The City of Miami is considering paying city employees in bitcoin.
A town in Canada is testing a new way to pay property taxes using Bitcoin.
Contrarily, some countries like China, Russia and Nigeria have taken their stand against Bitcoin.
Bitcoin has come a long way since its inception in 2009. The Central American nation of El Salvador has officially adopted Bitcoin as its national currency, which is a big step towards mainstream Bitcoin adoption.