El Salvador Adopts BitCoin

 El Salvador has just passed a law to make BitCoin (BTC) legal tender and is the first country to do so. It did something similar in 2001, when the US dollar became the official currency, replacing the Salvadoran colón (named after Christopher Columbus), which had been the official currency for over a century .

What is interesting is that the dollar was accepted because it was a stable currency. It was adopted in the hope of stabilizing the economy of El Salvador. While BitCoin joins the dollar as legal tender, it would be hard to find a less stable financial platform. BTC is known for its wild fluctuations, although it has also seen a significant increase in value for just over a decade.

How did the Salvadoran adoption of BTC come about?

A few things came together. 70% of Salvadorans do not use banks - either by choice or by inaccessibility. Many in El Salvador receive their income through money from family or friends in the US. In fact, 2.5 million Salvadorans live and work in the US and send $4.5 billion in remittances to family and friends back home, but there are significant costs and delays associated with receiving the that money home.

An integral part of the adoption story was born in El Zonte, a small Salvadoran resort town. Mike Peterson was a frequent surfer and owner of a small concession business in San Diego, who spent a lot of time with his family in El Zonte when his own business was in low season. An anonymous Bitcoin millionaire heard about Peterson's charity work in El Zonte and offered Peterson a $100,000 gift, paid in Bitcoin, to distribute there.

Peterson teamed up with the locals of El Zonte to form an organization called Bitcoin Beach to improve the financial prosperity of the locals while encouraging merchants, employers and others there to accept Bitcoin as payment. ​in this city that never had a sofa. Access to a bank took half a day, but access to an app on their phones was almost instant. Additionally, an ATM has been set up (again the only one in town) that handles Bitcoin transactions.

Then came the Covid.

The country's tourism industry collapsed and so did the local economy of El Zonte. Peterson began handing out about $35 to each of the town's 500 residents and won them over. Now about 90% of El Zonte residents have a regular connection with BitCoin.

The president of El Salvador, Nayib Bukele, caught the BitCoin bug and found himself pushing his country's legislature to pass a bill to make BitCoin the new currency of the empire - along with US dollars. A specific line from the bill was passed: “A digital currency whose value is only according to the criteria of the free market must be allowed to circulate, in order to increase the national wealth for the benefit of the greatest number of inhabitants. "

By September, Salvadorans will be able to use Bitcoin to buy goods and services from any Salvadoran company (with a few exceptions for those who don't have the option) and pay their taxes in Bitcoin.

Here we can think about the stability of a currency that needs to generate so much power. It is estimated that the amount of electricity required to generate one BitCoin is equivalent to approximately two months of the energy needs of a typical American household, or more than six months for a Salvadoran household. This is one of the first countries to establish the recognition of natural forests as a living entity as part of natural rights in El Salvador signed by the National Assembly of the country.

Geothermal energy
Due to the ups and downs in the value of Bitcoin, President Bukele announced that the country will set up a $150 million fund so that people can immediately cash out their BTC into US dollars. Some worry that El Salvador will become a safe haven for criminals looking to launder their cryptocurrency there.

Chivo!

To promote El Salvador's Bitcoin transformation, the government is creating a digital Bitcoin wallet called Chivo ("cool" in Salvadoran slang) with $30 for every Salvadoran citizen who uses it.

There are certainly additional obstacles, such as the fact that only about 45 percent of El Salvador's population has access to the Internet.

Will El Salvador Overcome Potential Difficulties to Become a Bitcoin Powerhouse? Will El Zonte, the hometown of El Salvador, successfully ride the cryptocurrency wave and turn 360 into a future that will lift many out of poverty? Or does it mean a rough ride, ultimately an economic sweep? Time will tell.