El Salvador is officially the first country in the world to accept Bitcoin as legal currency. CNBC reports the Central American nation’s Bitcoin law took effect on September 7th, letting Salvadorans use the cryptocurrency in physical and online shops. Accordingly, locals can use a Chivo wallet app on their phones to make purchases and manage their funds.
The government has been eager to give itself a good start. President Nayib Bukele revealed El Salvador had bought 550 Bitcoin as of this writing (about $26 million), and the country’s Congress passed a law last week establishing a $150 million fund to aid conversions from Bitcoin to US dollars (also accepted in El Salvador).
Bukele previously claimed the move would not only foster investment, tourism and overall economic development, but would make El Salvador’s financial system more inclusive by courting the 70 percent of residents who don’t have bank accounts. It’s also an acknowledgment of the financial reality of the country. Its economy relies in part on remittances from migrants, and Bitcoin theoretically streamlines those transfers.
Not everyone is thrilled with the decision, though. Cointelegraph noted that some Salvadorans have protested the adoption of Bitcoin, arguing that politicians didn’t consult with the public. They’re also worried cryptocurrency’s volatility could pose a serious risk next to the relative stability of the US dollar. Reuters added that police briefly held an outspoken critic of the Bitcoin law, Mario Gomez. Officials said it was related to a financial fraud investigation, but supporters were concerned this was an act of intimidation meant to silence political opposition.
We wouldn’t count on other countries rushing to join El Salvador. Countries like the US are exploring central bank cryptocurrencies, potentially more stable and easily regulated than Bitcoin. Other countries are hostile. China banned many companies and institutions from handling cryptocurrency, and India has looked into banning private currencies. There’s also the simple matter of varying economic conditions. Successful Bitcoin adoption in El Salvador wouldn’t guarantee success elsewhere — other countries might gain little if anything from embracing digital money.