El Salvador, last year became the first country to introduce Bitcoin as a legal tender.
What Is Cryptocurrency?
Cryptocurrencies are digital currencies or assets that are primarily decentralized networks based on blockchain technology. Due to this feature, it lets the users exchange money or conduct transactions outside the control of the government.
We can use cryptocurrency online to exchange goods and services, and the first cryptocurrency to be devised was Bitcoin in 2009. Most of the believers of cryptocurrency see it as the future of finance and currency.
Though cryptocurrency has raised eyebrows and criticisms due to its vulnerable nature and volatility, it has received immense support since it’s free from government and central bank control.
What Is El Salvador’s Bitcoin Law?
The President of El Salvador, Nayib Bukele, declared Bitcoin the first cryptocurrency to be used as a legal tender. Within a few days, the Bitcoin law got passed, and every business was required to accept Bitcoin as the mode of payment.
Bitcoin, which was initially devised as the form of currency outside government control, garnered significant protest from the citizens. The law also stated that any economic agent in El Salvador should accept Bitcoin as a payment form in exchange for goods and services.
As stated by the El Salvador government, the introduction of Bitcoin as the national currency was due to a few critical reasons. But cryptocurrencies like Bitcoin are volatile and have the risks of money laundering in general.
However, at present, the Salvadoran government figures claim that there are a few times that the Bitcoin usage would be optional and the other times mandatory. Article 7 of the Bitcoin law still states Bitcoin to be a compulsory acceptance of finance in El Salvador.
At present, the government has roped in a budget of about $20 million to boost the Bitcoin plan. The plan will offer more access to people with banking services and cut off tons of commission fees paid to make bank transfers.
What Is Chivo Digital Wallet In El Salvador?
With the introduction of Bitcoin as its national currency, the government even announced its Bitcoin wallet, Chivo. Bitcoins are added to these digital wallets that will operate like PayPal and access a mobile app.
Chivo wallet, which means ‘cool’ in the regional language, can only be downloaded if you have access to a Salvadoran ID document. What are the other distinct features of this wallet?
- The users would have a balance in dollars and Bitcoins and can make payments accordingly.
- New users who sign up to the app get a bonus of $30 in Bitcoin.
- To make a transaction and pay for any products or services, the seller and the buyer should have the app installed.
- To draw and deposit cash, 200 Chivo ATMs have been deployed.
- The user of the Chivo wallet can make use of it to buy and sell services and goods and make transfers within bank accounts commission-free.
- The Chivo app will be available for international payments.
Are El Salvador Residents Supporting This New Payment Method?
As soon as Chivo was launched, the app had to face multiple technical failures. Even the ATMs were facing a shortage of funds since people rushed to convert Bitcoins into dollar bills. People protested across the nation against the forceful implementation of the currency on them.
A few of the protestors set the Bitcoin machines on fire while the other people protested with signs that called President Bukele a dictator. People of El Salvador protested against the government’s move due to the inefficiency of the entire Bitcoin plan and the Chivo payment platform.
According to a poll conducted by El Salvador’s chamber of commerce, international organizations, business people, and 93% of Salvadoran people were against Bitcoin currency being their national currency.
But the cryptocurrency has enabled some residents without bank accounts to make digital payments, boost earnings, or invest savings. Its use is gradually picking up among the youth.
What Are The Risks Involved?
Cryptocurrency, with its myriad of benefits, has its downsides too. With its sheer nature of volatility, its impact on inflation in a nation known for high poverty and unemployment may be drastic.
Cryptocurrencies like Bitcoins are mined using complex methods and techniques that may consume vast amounts of electricity. This situation may lead to significant pressure on the country’s economy.
At present, the World Bank also rejected the plea of the El Salvador government to accept Bitcoin as the national currency due to transparency issues. With serious money laundering risks and other illegal usages, the cryptocurrency will be a colossal blunder if the government doesn’t implement specific regulatory measures.
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