El Salvador’s Bitcoin adoption causes lots of question

Recently, El Salvador adopted bitcoin, but the country’s decision caused a lot of questions. Steve Hanke, an economist, and John Hopkins University professor strongly criticized El Salvador’s approach to bitcoin. He stated that bitcoin is not used in day-to-day transactions for practical reasons.

People are not going to pay for a taxi with cryptocurrency. The vast majority of people in El Salvador, more precisely 70% of the local population do not even have bank accounts. He added that since El Salvador does not have a currency of its own, and uses the U.S. dollar, the country will most likely run out of money. Hanke also mentioned another important factor. He noted that BTC sellers will target the country, thus draining its dollar reserves.

Steve Hanke believes that criminal elements are behind El Salvador’s bitcoin adoption. The applied economics professor noted that criminal elements might also influence other South American countries. So, Paraguay, as well as Panama, might also adopt the world’s largest cryptocurrency. He predicts that if these countries adopt cryptocurrency it will be a disaster. Criminal elements will be able to use these countries as a means to access real currency in the form of “green bucks”.

Bitcoin and President Nayib Bukele

This month, the Salvadorian Congress passed President Nayib Bukele’s, Bitcoin Bill. 62 out of 84 lawmakers ruled in favor of the bill. Apart from adopting bitcoin as legal tender, the bill also includes several concessions. For example, zero capital gains tax on BTC and tax payments in BTC. The country is also offering permanent residency to anyone who invests 3 BTC in the country.

The country is ready to mitigate some of the risk factors. The state’s development bank will hold millions of dollars equivalent to BTC in trust. El Salvador will use the fund to buy bitcoin from citizens over time.

To facilitate the transition, Strike is building a bitcoin wallet on the behalf of the country’s government, that locals can use. In addition, the government of El Salvador will provide a way for citizens to instantly convert BTC to U.S. dollar. El Salvador will also host training sessions for those unfamiliar with BTC.

President Bukele is also exploring using renewable energy to power bitcoin mining in El Salvador. He came up with an interesting idea. Bukele wants to use geothermal energy sources for cryptocurrency mining. The energy would be cheap as well as clean according to Bukele.