El Salvador prepares for the imminent adoption of Bitcoin

As El Salvador prepares to adopt Bitcoin as legal tender, let’s take a look at how things are currently in the Central American country.

At the urging of President Nayib Bukele, El Salvador’s legislature passed a law validating Bitcoin as legal tender on June 9. n last month, Bukele announced that the adoption would take place on September 7.

Thus, citizens will be able to buy, pay taxes, and buy real estate with Bitcoin. Also, by law, anyone with access to the technology must accept Bitcoin as payment. However, the three pages of government regulations do not mention any punishment for non-compliance.

pros and cons

Proponents say it will promote financial inclusion for those without bank accounts, as well as facilitate access to a potentially high-yielding asset. Another significant argument is that it will reduce the cost of remittances, which represent a quarter of the country’s GDP. In fact, many countries in the region are eagerly waiting to see if this is the case. If that turns out to be the case, many are likely to follow suit, according to the president of a regional development bank.

However, critics say the plan could hit poorer Salvadorans more drastically when the price drops. list could go on – from rising costs for banks and insurers to providing an outlet for money launderers and the potential risk of fundamental economic stability. For example, rating agency Moody’s downgraded the country’s debt in part because of the law. In particular, the World Bank refused to assist El Salvador in the adoption process, while the International Monetary Fund warned of the many issues raised.

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Skeptical Salvadorans

Unfortunately for the government, polls show that the majority of Salvadorans are against the plan. A survey shows that 7 out of 10 Salvadorans even want to repeal the Bitcoin law. Previously, a group of citizens in El Salvador, led by opposition politician Jaime Guevara, filed a lawsuit against the country for adopting bitcoin as legal tender. re have also been protests against the approval of the law and its imminent adoption by groups ranging from retirees to unions.

Meanwhile, the Bukele government is taking various steps to simplify the adoption of Bitcoin. For example, it is launching a Bitcoin digital wallet called «Chivo», in which new users will receive $ 30 worth of Bitcoin. Chivo ATMs are also being installed across the country, which will allow consumers to buy Bitcoins or convert them to cash with the government absorbing commission costs.

se initiatives and Chivo’s ability to convert are supported by a $ 150 million fund approved by the legislator this week. However, some economists wonder if it would be big enough in the event of a crash. refore, a possible drop in the price of Bitcoin could put the government under a broader tax burden.

“If, for example, taxes were paid in cryptocurrencies, while spending was mainly kept in dollars, there would be strong pressure on the foreign exchange market and on the level of international reserves,” Torino Capital Ella said in a note.

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