El Salvador becomes first country to make Bitcoin legal tender

El Salvador became the first country in the world to grant legal tender status to Bitcoin. Read all you need to know.

El Salvador’s President Nayib Bukele, Source: Reuters
El Salvador’s President Nayib Bukele, Source: Reuters

El Salvador on June 9, 2021, became the first country in the world to grant legal tender status to Bitcoin. The El Salvador Congress approved the bill to make Bitcoin a legal tender in the country.

The adoption of Bitcoin, the world’s largest cryptocurrency as a legal tender will become law in 90 days.

El Salvador’s President Nayib Bukele on June 5, 2021, had announced about sending a bill to Congress for making Bitcoin a legal tender in the country. The bill was approved with a supermajority with 62 votes out of 84.

Bitcoin will revive El Salvador’s remittance dependent economy

•During the Bitcoin 2021 conference in Miami, Bukele said making Bitcoin a legal tender would generate jobs in the short term and provide financial inclusion to thousands outside the formal economy.

•Bukele said the bill has the potential to transform the remittance-dependent economy where 70 per cent of the population does not hold a bank account and works in the informal economy.

•The economy of El Salvador relies heavily on the remittances sent back from workers abroad. In such cases, the intermediaries in the remittance chain make cuts up to 20 per cent. Implementation of Bitcoin would severely impact the money-laundering chains in the country.

•A report by the World showed that the country made up about $6 billion (approximately a fifth of GDP) through remittances in 2019. As per more official reports, the country showed a total of $5.9 million (22 per cent) of GDP through remittances in 2020.

•Implementation of Bitcoin will aid the people of El Salvador in quick conversion of payment received in Bitcoins into dollars and saving them from the risk of value plummeting.

El Salvador will not be de-dollarized

•Bukele added that the US Dollar will continue to be the dominant legal tender and the use of Bitcoin would be optional.

• “The government will guarantee the convertibility to the exact value in dollars at the moment of each transaction,” he said.

What is Bitcoin?

•Bitcoin is a digital currency and the world’s largest cryptocurrency. Bitcoin is the first cryptocurrency that was created in 2009 by Satoshi Nakamoto.

•Bitcoin is the first currency to use a decentralized peer-to-peer payment network with no central authority or middlemen. The design of the Bitcoin network is open-source which means nobody owns Bitcoin.

•Bitcoin is currently priced at $32,987.02.

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