El Salvador recently made sensational headlines following the outcomes of the 2021 Bitcoin Conference, when the country’s national leader first revealed his plan to adopt Bitcoin as legal tender.
The news was shared in the form of a video broadcast to the international event that was held at the Mana Wynwood Convention Center in Miami.
President Nayib Bukele announced his intention to introduce legislation that will make his country the first sovereign Republic in the world to incorporate Bitcoin as legal tender, alongside the U.S. dollar.
The El Salvador leader further intimated that his country had partnered with a digital wallet company to construct the nation’s Bitcoin-based financial infrastructure.
Considered the world’s largest Bitcoin event yet, President Bukele’s revelation came as a shock to different circles across the world. This aspect is reflected in significant downward Bitcoin price movements that have been influenced, in part, by recent negative sentiments from the tech entrepreneur Elon Musk.
Bitcoin Made Legal Tender
El Salvador has made history after becoming the first nation on the planet to adopt the Bitcoin cryptocurrency as legal tender.
The latest news comes hot on the heels of a decision by Congress to approve El Salvador’s President Nayib Bukele’s proposal to adopt the virtual currency in a move that has since sent shockwaves across the crypto community.
The landmark decision was reflected in the lawmakers vote count in which 62 legislators out of 84 voted in favour of the need to design a law that would facilitate the country’s Bitcoin adoption.
Quite obviously, the latest events appear to raise concerns about the potential ramifications of the country’s financial program with the International Monetary Fund. The country’s president has expressed strong belief that the virtual currency will go a long way to transform lives through a disruptive currency.
Considering that El Salvador lacks its own currency in practice, the president has a lot of good things to say about his expectation regarding both internal and external effects of Bitcoin adoption.
First, in the short term, President Bukele claims that Bitcoin adoption will create more jobs in the country and provide a unique opportunity for financial inclusion across various formal economic sectors.
The need for financial inclusion in El Salvador cannot be overstated considering that 70 percent of the country’s population do not have a bank account and operate within the informal economic sector.
Bitcoin gives the promise of increased access to financial services, including affordable credit, savings, investment and secure monetary exchange between various categories of persons.
He adds that Bitcoin would serve as a highly suitable mechanism for people looking to transfer large amounts of money, to the tune of $6 billion, in annual remittances. This argument holds sense in light of the fact that remittances contribute 20 percent to El Salvador’s Gross Domestic Product (GDP) – Salvadorans in the diaspora remit $4 billion every year.
Further, in a Twitter post, the El Salvador leader went on to assert his administration’s commitment in considering the sustainability of Bitcoin mining as a significant energy consumer. The President confirmed that he had directed the nation’s state-owned renewable energy firm to establish a plan to provide facilities for Bitcoin mining based on clean and affordable energy.
While most Bitcoin proponents may be quick to applaud El Salvador’s latest decision to make Bitcoin its legal tender alongside the U.S. dollar, a number of critical concerns persist.
Quite obviously, Bitcoin’s attribute of being unstable will have a significant effect on how Salvadorans will interact with the virtual currency.
Otherwise, the government should develop financial policy that will serve to operate beyond the long term implications of Bitcoin adoption.