Central banks of countries around the world including India are not ready to give legal currency status to cryptocurrencies. However, El Salvador has become the first country in the world to adopt bitcoin as a legal tender. This is to say that the people of this country of Central America can use bitcoin for financial transactions.
Fears of encouragement of money laundering
Supporters of cryptocurrency experimentation in the real world say it will reduce the commissions charged to El Salvador on billions of dollars of foreign funds coming in each year. However, those opposing the adoption of virtual currency as a legal tender say that it can encourage money laundering.
Concerns over huge volatility in bitcoin
However, according to a survey on cryptocurrency adoption, people in El Salvador seem to be skeptical about the use of bitcoin. His concern is about the immense ups and downs in him. Critics say this will increase regulatory and financial risk for financial institutions.
Remittance commission of $ 400 million will be saved
The plan to adopt cryptocurrency in El Salvador is being promoted by the young and popular President Nayib Bukele. The president wants his compatriots living abroad, especially in the US, to save the $400 million they spend on commissions to repatriate billions of dollars each year.
El Salvador’s remittance income is 23% of GDP
Last year, $6 billion came in El Salvador as remittances. This was equivalent to 23% of its Gross Domestic Product (GDP). Very few countries have so much remittance as compared to GDP. It is noteworthy that in 2001, El Salvador abolished its currency cologne and adopted the US dollar in its place.
Government engaged in setting up ATM of ‘Shivo’ digital wallet
Before adopting bitcoin as a legal tender, the government was busy installing ATMs for its Shiva digital wallet. Through this wallet, cryptocurrencies can be converted into dollars and withdrawn without commission. However, the President has told the citizens that there should be no rush about the results of this initiative.
Initial purchase of 400 bitcoins
On Monday, El Salvador made an initial purchase of 400 bitcoins, after which the price of the cryptocurrency rose 1.49% to more than $52,680. Bitcoin has very high volatility. Bitcoin, which went above $64,000 in April this year, fell to $30,000 in May.
Moody’s downgrades credit rating
After making bitcoin a legal tender, El Salvador has started facing some problems. Rating agency Moody’s downgraded El Salvador’s credit rating and dollar-denominated bonds are under pressure. According to experts, giving bitcoin a dollar equivalent status could weaken the chances of a financing agreement worth more than $1 billion with the International Monetary Fund (IMF).
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