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These are indeed very exciting times. Just a few weeks ago El Salvador’s President, Nayib Bukele announced that his nation will likely treat bitcoin as legal tender and now it’s official, there is a Bitcoin Law and El Salvador is the first country in the world to legalize bitcoin. Question is, what does this mean for the citizens of El Salvador and the rest of us?
Hey folks. Yup! I’m back with the academy to share my 2 cents about blockchain and crypto. Been almost a year since I last blogged here. Been a challenging year for me, caring for my aging parents, looking after my siblings and keeping my dad at home. I’m sure it hasn’t been easy for you too. But, hey. Let’s be positive! Life must go on.
In a video broadcast to Bitcoin 2021, one of the biggest in-person gathering event on Bitcoin in Miami, President Nayib Bukele reported El Salvador’s association with computerized wallet organization, Strike, to assemble the country’s cutting edge monetary framework utilizing bitcoin innovation.
That implies BTC can be utilized like a Visa or fiat cash to formally buy labor and products. As yet, El Salvador has depended vigorously on the U.S. dollar ever since they abandoned their fiat currency called “colon” back in 2001.
El Salvador, to a great extent, is a cash economy. 70% of individuals there don’t have financial balances, Visas or even bank accounts. Settlements, or the cash sent home by transients, represent over 20% of El Salvador’s GDP.
Money transfer companies are charging anywhere between 10% to 15% or more in exchange fees. Not to mention, the time it can take for the transfers or exchanges to happen, sometimes days on end.
How Bitcoin Commands Real Value
Bitcoin isn’t controlled by any individual, group or government. It is worth mentioning, due to bitcoin’s scarcity aspect, they can’t be re-printed, like fiat currency. There are only going to be 21 million bitcoin’s ever mined and circulated into the world.
Bukele has promoted the utilization of Bitcoin for its capability to help Salvadorans living abroad send settlements back home while saying the US dollar will likewise proceed as a legal currency alongside bitcoin.
He added that the utilization of Bitcoin, would not be a danger to its citizens or banking clients. The bitcoin law will go into full force within 90 days.
“The public authority will ensure the convertibility to the specific worth in dollars right now of every exchange,” Bukele said.
Con 62 votos, el pleno legislativo aprueba la #LeyBitcoin con la que El Salvador adopta el #Bitcoin como moneda de circulación legal.
¡#LaNuevaAsamblea sigue haciendo historia! pic.twitter.com/Ur9OQzPvYI
— Asamblea Legislativa (@AsambleaSV) June 9, 2021
El Salvador’s Reason To Legalize Bitcoin
El Salvador’s dollarised economy depends intensely on cash sent back from residents working abroad.
World Bank information showed settlements to the nation made up almost $6bn, about a fifth of GDP, in 2019, probably the most elevated proportion on the planet.
This is what it further means for Salvadorians:-
- Merchandise might be bought and sold in bitcoin.
- Taxes might be paid in bitcoin.
- Bitcoin exchanges won’t be charged a capital gains tax.
- The U.S. dollar will stay as the reference currency to settle bitcoins.
- Bitcoin MUST be accepted by all companies.
- The government will provide alternatives to enable crypto transactions.
Development Bank of El Salvador has been entrusted by the government of El Salvador with a huge task, which will empower the “momentary convertibility of bitcoin to dollar,” the bill said.
However, specialists have said the transition to Bitcoin could complicate talks with the IMF, where El Salvador is looking to garner a $1Billion USD fund.
Read the Passed El Salvador Bitcoin Bill:
El Salvador Bitcoin Bill Draft by CoinDesk
Video
Why El Salvador is betting big on Bitcoin to be legalized? How can El Salvador benefit from bitcoin? What are the potential risks? How on the other hand will the move change for bitcoin? All there questions answered by the folks at DW Shift.
In Conclusion
So basically, with El Salvador becoming the first nation to legalize the use of Bitcoin, the country is certainly attracting the attention of many bitcoin, blockchain businesses. Even Digital Asset Exchanges (DAX) are looking at opening shop there. This evidently will push El Salvador’s GDP higher and give the economically challenged nation a push up.
But politically, the country’s leadership needs to be certain no hiccups will happen after the bill is passed. Else all this “good news” may just back-fire and the price of Bitcoin may get affected even more.
Another country is also now sitting down with legislators to discuss their #BitcoinBill. Panama may be the next country in line to make Bitcoin legal tender.
On another note, China is not stopping in its tracks to ban cryptocurrency mining and trading. Most likely the reason why Bitcoin and other Alt coins have been seeing some pretty scary price dips lately. I asked our Co-founder, Mr Amar about his view and here’s what he said:
“Bitcoin’s mining dominance needs to shift from a Chinese centric control to a more global control, if possible. This has already started happening and many US based mining companies are flocking to take the hash rate off China now!”
What do you think? Is it a good thing when governments start recognizing Bitcoin and accepting it as legal tender?
Share your thoughts below.