How El Salvador Became the First Country to Adopt Bitcoin
Lawmakers from El Salvador made history this week by passing a resolution to make bitcoin a legal currency. The vast majority of lawmakers, more precisely 62 out 84 legislators voted in favor of bitcoin. The country’s President Nayib Bukele has large amounts of political power in El Salvador. His party controls congress, so it is not surprising that lawmakers approved the bill.
El Salvador is the first country in the world that made such a decision. Nayib Bukele described this decision as a historic step towards financial inclusion and economic growth for the country.
Citizens will be able to use cryptocurrency to do everything from paying taxes and paying off debts to buying goods as well as services. The world’s largest cryptocurrency will become an official currency for El Salvador in just under three months.
It won’t be the only currency in the country, as let’s don’t forget about the U.S. dollar. The greenback was previously the country’s only currency, it will be sticking around as an option. El Salvador’s leader Bukele wants the citizens of his country to think about money in terms of bitcoin, not dollars. The resolution states that people should be able to convert between two currencies at any time and that U.S. dollars will be used as the reference currency for accounting.
Bitcoin and new opportunities
El Salvador is not the only country that wants to reduce its reliance on the U.S. dollar, which it adopted in 2000. In fact, in the past, some poor countries proposed cryptocurrencies as a way of ending reliance on the dollar.
As of 2021, El Salvador is not a large hub for mining bitcoin. El Salvador is not in the top 10 mining countries. The country’s leader could be looking to change the situation. To this end, Bukele tweeted that he instructed the state-owned electric company to provide cheap electricity for mining, powered by volcanoes.
The state of the local economy is far from being ideal, and Salvadorians are highly reliant on remittances. Payments from family members and friends in the U.S. make up one-fifth of gross domestic product. Bitcoin could make it cheaper to transfer funds. What’s more, the country’s government will create a trust at the Development Bank of El Salvador. The purpose of the trust is to enable automatic conversion of bitcoin into dollars. The law approved by lawmakers will take effect 90 days after its publication in the official gazette.
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