El Salvador became the first country in the world to embrace bitcoin as legal coinage on Tuesday, a real-life experiment that supporters claim could decrease commission costs for billions of dollars sent home from abroad, but critics worry will fuel money laundering.
THE INITIATIVE BACKED BY FUNDS AND GOVT
The initiative, backed by the young, dynamic, and popular President Nayib Bukele, aims to save Salvadorans $400 million in remittance fees each year, the majority of which are remitted from the United States.
El Salvador received about $6 billion in remittances last year, accounting for 23 percent of its GDP, one of the highest percentages in the world.
According to polls, Salvadorans are hesitant of adopting bitcoin and are concerned about the cryptocurrency’s volatility, which critics believe could create regulatory and financial concerns for financial institutions. Despite this, some residents remain hopeful.
‘Bitcoin Beach’ aims to make El Zonte the world’s first bitcoin economy. Prior to debut, the government has already installed ATMs of its Chivo digital wallet, which will allow the cryptocurrency to be converted into dollars and withdrawn without commission, but Bukele on Monday sought to dampen expectations for immediate results by asking for patience.
El Salvador purchased its first 400 bitcoins on Monday, temporarily boosting bitcoin prices up 1.49 percent to more than $52,680. The bitcoin market has a reputation for being extremely volatile. This spring, it soared to over $64,000 in April before plummeting to about $30,000 in May.
El Salvador’s creditworthiness was reduced by Moody’s after Bukele’s bitcoin bill was adopted, and the country’s dollar-denominated bonds were also under pressure.
However, Bukele, who isn’t afraid of controversy, retweeted a video on Monday that showed a face superimposed on actor Jaime Foxx in a moment from Quentin Tarantino’s film Django Unchained, about American slavery.
Bukele was shown flogging a slave trader with the IMF insignia emblazoned on his face in the video. The retweet was later deleted by Bukele. His own tweet reads,
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