As of September 7, Bitcoin will be legal tender in El Salvador. El Salvador is the first country to fully open its doors to the use of Bitcoin. The first steps have already been taken.
El Salvador is a developing country in Central America, bordering Honduras and Guatemala. Compared to other developing countries, El Salvador experiences relatively low GDP growth. 22.8% of the population lives below the poverty line and the average wage is very low.
The country’s decision to make Bitcoin a legal tender in El Salvador is a bet of sorts. It is meant to boost the economy and put the country more on a better economic footing.
To promote the new currency, the government has taken steps to encourage citizens to buy and use Bitcoin. The government offered $30 in Bitcoins to anyone who signs up for the digital wallet “Chivo.” It is one of the most popular apps in the country.
El Salvador is also offering citizenship to any foreigner who invest three Bitcoins in the country: Three Bitcoins are currently worth about $140,000.
This announcement has piqued the interest of other countries, including the Central American neighbor Panama. They may look to make cryptocurrencies legal tender in the future as well.
What does this mean for El Salvador?
Legal tender is money that must be accepted when it is offered as payment. Legal tender has traditionally taken the form of banknotes or coins, but like everything else, it will eventually have to catch up with the modern way of life and go digital.
El Salvador has used the US dollar as legal tender since 2001. All merchants and businesses accept this legal tender as payment for a good or service. But they are not required to accept all legal tender.
The only exception is debts owed to creditors. Businesses and merchants in El Salvador have the option to refuse bitcoin payments, even if the currency becomes legal tender. This would be the case in any country that chooses to make cryptocurrencies legal tender.
How will bitcoin help the economy?
The president of El Salvador hopes that the introduction of Bitcoin as legal tender in the country will attract investors to the country.u will encourage more money to be spent in the country. El Salvador is falling behind other developing countries and is taking steps to improve its financial status.
The US$30 given to every citizen who opens a digital wallet will temporarily boost the economy and provide a short-term boost. The boost could help the country save its economy. But it’s unclear if the government can continue to use these types of incentives to improve the situation.
Making bitcoin a legal tender is a bold move. El Salvador will attract the attention of wealthy investors, which could help boost the economy. However, the measures that have already been taken are expensive and may not pan out.