Salvadoran President Nayib Bukele declared Bitcoin legal tender in the country. In doing so, he ratified the decision of the Salvadoran Congress, which approved by an absolute majority (62 votes out of 84) the acceptance of Bitcoin as legal currency. It thus became the second official currency of this state next to the US dollar. El Salvador thus became the first country in the world to adopt the decentralized cryptocurrency as its official currency.
It is estimated that three quarters of Salvador’s population do not have access to traditional banking products, such as a current account, and around 40 percent do not have access to the Internet. The main reason for this step is therefore the effort to attract bitcoin investors to the country. The price of Bitcoin responded to this announcement with a growth of 5 percent.
Hours after Salvador was the first state to “adopt” Bitcoin, President Bukele tasked the state energy company to begin preparatory work for cryptocurrency mining using geothermal energy. According to the Salvadoran president’s statement on the social network Twitter, state-owned LaGeo engineers have drilled a new well, which should provide approximately 95 MW of electricity. As it is the use of heat from the volcano, this energy is 100% ecologically clean.
It is around this new well that a mining center will grow, which will generate bitcoins for the country. Cryptocurrency mining has recently been criticized for its environmental impact. According to the latest estimates, Bitcoin production consumes approximately 105 terawatt hours per year, which is as much electricity as the Philippines, for example.
El Salvador decided to abandon its own currency as early as 2001, when the country switched to the US dollar. Salvadorans living abroad (mostly in the United States) send around $ 6 billion each year, or about 16% of the Central American country’s gross domestic product. The decision to introduce Bitcoin as a parallel currency will help eliminate charges for sending money home from abroad.
Some other countries in Latin America, such as Venezuela or the Bahamas, have come up with their own cryptocurrencies, but none have enacted Bitcoin as currency. Some other countries, such as China, Iran or Turkey, are trying to curb or ban cryptocurrencies.
Salvador is the first country in the world to take such an ambitious step. Given that the country has recent experience with the dollarization of the economy, it will probably not be more difficult for it. However, critics point to the danger of extreme volatility of cryptocurrencies. For example, if you receive a payout in Bitcoins, you will be paid a different salary each month, and your account balance may be halved two days after the payout.
Bitcoin payment was legal and quite popular in the country even before this decision. The fishing village of El Zonte, located on the Pacific coast about 45 km from the capital San Salvador, is world-famous. It decided to take this step two years before the central government, and it was possible to buy here not only for dollars but also for Bitcoins. There is even an ATM in El Zonte, which allows you not only to withdraw dollars in exchange for Bitcoins, but also to deposit dollars in cash and credit your bitcoin wallet. Among surfers, the local beach has earned the nickname “Bitcoin Beach”.
Source: Diit.cz by diit.cz.
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