Bitcoin, the original breakthrough cryptocurrency, has for the first time become legal tender as El Salvador executed its high profile and widely debated plan.
In crypto markets, however, Bitcoin failed to see a day-one boost as the crypto edged 1% lower to trade at around US$51,208.
Upon what is being referred to locally as ‘Bitcoin Day’ the crypto is now to be accepted as tender in the South American country alongside the US dollar which has been widely circulated as tender since 2001.
It cost El Salvador around US$400mln to use the dollar as tender last year, with some US$6bn of dollar remittances in 2020 (equating to more than 20% of the country’s GDP). Reducing the cost and dependence upon the dollar has been central to the South American country’s Bitcoin enthusiasm.
Following the passing of the country’s Bitcoin Law a month ago, Salvadorans can now use Bitcoin to pay for goods and services, and, can even pay their taxes to the government using the cryptocurrency.
The country bought some 200 Bitcoins, worth US$10.2mln, ahead of today’s landmark and it pledged to buy “
El Salvador’s digital currency revolution has been cheered by the crypto-evangelists, who globally have promoted across social media a ‘buy US$30 of Bitcoin’ campaign (mirroring the US$30 that each Salvadoran was promised in the roll-out. But, it is more widely seen as a controversial move.
Political opponents of president Nayib Bukele said the change was unconstitutional, whilst the World Bank in June highlighted macroeconomic and legal issues.
Moodys downgraded El Salvador’s credit rating in the wake of the Bitcoin Law and the country’s dollar denominated bond debt has been pressured international markets. Many market analysts have pointed to the probability of volatility, which could negatively impact Salvadorans in the future.
It also comes as the country has sought a US$1bn financing with the International Monetary Fund (IMF).