El Salvador steps into the future [or chaos, tick as preferred], having recognised Bitcoin

Should the world celebrate El Salvador for recognising Bitcoin?

El Salvador, a county that often times falls under the criticism of the West, has become the first country in the world to that recognised the Bitcoin as a legal currency. Following the move, the country has received unexpected support from crypto investors on Reddit.

El Salvador's support on Bitcoin comes from Reddit crypto Investors

On Tuesday, September 7, El Salvador has become the first country in the world to recognise Bitcoin as a legal currency.

The legal assembly of El Salvador approved the Bitcoin law in June and in late August approved a $150 million trust to ensure the automatic convertibility of the Bitcoin into the US dollar.

Under the new law, the Bitcoin will have unlimited circulation in any transaction, and the exchange rate between the cryptocurrency and the US dollar will be freely set by the market. The law obligates all institutions to accept bitcoins as a form of payment.

The government of President Nayib Bukele believes that the legal Bitcoin will save the Salvadorans living abroad millions of dollars in fees on transfers home. Last year, the Salvadorans wired $400 million, which amounted to 22 percent of El Salvador's GDP.

Starting Tuesday, September 7, the citizens who decide to install a cryptocurrency app on their mobile phones will receive a Bitcoin bonus equivalent to $30, excluding a possibility of exchanging it for dollars.

The government is setting up over 200 "Chivo wallet points" across the country — Bitcoin ATMs.

On Monday, September 6, Bukele posted a tweet with the hashtag #BitcoinDay to buy "200 Bitcoins." According to cryptocurrency exchange platforms, the price of the Bitcoin exceeded the mark of $52,000 on September 6.

Therefore, the purchase cost El Salvador more than $ 10 million.

The population prefers the US dollar

According to the poll conducted by the University of Central America's Institute of Public Opinion:

  • as many as 66.7 percent of El Salvador's population believes the Bitcoin law should be abolished;
  • 78.3 percent of citizens have either little or no interest in downloading the Chivo app on their phones;
  • 71.2 percent prefer to use the dollar.

Two currencies are considered to be the official currencies in El Salvador under the Currency Integration Act: the US dollar and the colon, although the latter is no longer in circulation.

Laura Andrade, the Director of the Institute of Public Opinion, claims that people resist to the new law, because they do not consider the Bitcoin wallet to be a way that will improve their economic situation.

Why does El Salvador need Bitcoin?

El Salvador's initiative has received negative response from the West, because this decision breaks the monopoly on the reserve currencies — the dollar and the euro. In fact, the project is aimed at reviving the country's economy, which has been stagnating since the dollarization in 2001 with an average growth from two to four percent. In 2020, GDP contracted by 7.9 percent due to the COVID-19 pandemic.

Forty-year-old Bukele is not afraid of anything, as he enjoys the constitutional majority in the parliament and is popular among the elite. Last week, a Supreme Court chamber, appointed by parliament in May, gave him the green light for re-election. Bukele's presidency expires in 2024.

Crypto investors offer help El Salvador

The project received unexpected support on a popular investor page on Reddit platform. It was in particular offered to coordinate the purchase of $30 from every Salvadoran on the BTC platform.

"I have meant this as more of a support gesture, rather than a pump. Its a first that a nation has adopted Bitcoin. This is an important time in Bitcoin. Lets show El Salvador, for those who are on the fence about it still, that Bitcoin has value for them. And for every one. Bitcoin is meaningful," a user posting under the moniker @thadiusb wrote.

According to the poster, who is quite active in the community, if each of the 3.3 million Reddit members buys $30 in bitcoins, the total purchase will amount to $99.5 million.

The poster's suggestion has received over replies on Reddit, most of them supporting the initiative. The message quickly went viral and reached major investors.

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Author`s name Lyuba Lulko
Editor Dmitry Sudakov