San Salvador: Central American country El Salvador became the first country in the world to adopt bitcoin legal, on Tuesday, Agence France-Presse (AFP) reported.
President Nayib Bukele went forward with the move despite scepticism among the masses in the country and international warnings that it would be a risk for consumers. Bukele's government claimed that this would give their people access to bank services for the first time, and 400 million dollars in fees on remittances sent from abroad could be saved annually. A fifth of El Salvador GDP comes from remittances by 1.5 million expats.
On Monday evening, Bukele announced that the country bought 400 bitcoins- trading at 21 million dollars according to cryptocurrency app Gemini- in two tranches of 200 bitcoins and said more were coming. He tweeted that for the first time in history, the world's eyes will be on El Salvador. The government is installing more than 200 bitcoin teller machines in the country, and Bukele promised 30 US dollars for each citizen who adopts the currency.
But most of the citizens in the country had rejected the bitcoin and will continue using US dollars, which has been in use for the last 20 years, according to recent polls. Sceptics argue that bitcoin is a currency that does not exist, and it only serves the rich. The Central American University (CAU) has found through a poll that 70 per cent of the population opposed the administration's move. Around two-thirds of them have no interest in downloading the "Chivo" electric wallet for using bitcoin.
Experts and regulators have reiterated the concerns on the currency's high volatility and lack of protection for its users. They believe that it could affect the prices of goods and services. The director of the Public Opinion Institute of CAU, Laura Andrade, told AFP that the new decision by the administration was taken without consulting people.
In June, the currency had fallen below 30,000 US dollars, which was less than half of the currency's all-time high of more than 64,000 US dollars two months earlier. Incidentally, in the same month, the El Salvador parliament had passed a law that allows crypto money to be accepted for all goods and services along with the US dollar. The bill was an initiative of Bukele and got approved in 24 hours. Salvadoran Foundation for Economic and Social Development (FUSADE) said that it was unconstitutional to make it compulsory for merchants to accept bitcoins as a form of payment.
But, Bukele accused opponents of creating fear in people by talking against the currency.
However, World Bank, International Monitory Fund, Inter-American Development Bank etc., have expressed concerns about the adoption. The US has urged El Salvador to use the currency in a regulated, transparent and responsible way. The coin is criticised for its illegal use for money laundering, criminal activities and financing terrorism.
Now, the currency is widely used in El Salvador's coastal town of El Zonte.