El Salvador Becomes the First Country To Accept Bitcoin as a Legal Tender
Photo by Sajad Nori via Unsplash
SAN SALVADOR, El Salvador – The Salvadoran congress voted to adopt Bitcoin as a legal tender on June 7, becoming the first country in the world to do so.
President Nayib Bukele of the Nuevas Ideas party signed a bill into law in the Blue Room of the Legislative Palace outlining the use of Bitcoin in El Salvador. It contains 16 articles explaining the uses and limitations of the volatile cryptocurrency within the Salvadoran economy.
Since the first day of 2001 under the Law of Monetary Integration, El Salvador has used the U.S. dollar as its sole official currency. As of June 9, however, Bitcoin is now an official tener as well.
The law won’t go into effect until a 90 day period has passed. In the meantime, Salvadoran lawmakers and public servants will work to educate the public on Bitcoin and its use.
“Bitcoin has been used in El Salvador since about 4 years ago in tourist areas like El Zonte, where Surf City is held every year. It was adopted because of the large number of tourists and the issue they had with currency. A lot of the surfing tourists are not from the United States. People come from all around the world,” explains Aracely Portillo to Scriberr News, the first councilor of the mayor’s office of Sesori.
“Bitcoin is a universal currency for European and Asian tourists, while the dollar is not. Gaining revenue for locals will be easier,” continued Portillo.
The consensus from Salvadorian natives seems to be divided around 70% in favor and 30% against, according to Portillo.
“If you go to the tourist areas of the country, they are all familiar with bitcoin. They are happy to never have to turn down a customer, as they can accept bitcoin. On the other side of the nation, people are unsure. They see the coin as volatile,” Portillo told Scriberr News.
“They believe that if they were to receive a salary in Bitcoin and the currency’s value were to go down, they’d lose their money. This is not the case…If you read the articles, you’ll notice that the law is made to protect the consumer. If the coin drops in value, the government will take responsibility for the loss.”
Although businesses must accept Bitcoin,the use of it as a consumer is not mandatory.
Anyone who does not understand the surrancy or does not have access to the internet is not required to use it, as stated in Article 13.
Michael Brandel, an economist currently teaching at Rice University before transferring to the University of Texas in the fall, is less optimistic about the new law.
“ I hate to be pessimistic, but I think part of it is a publicity stunt by the Salvadoran government to try to draw attention to themselves. They also signed a deal recently…to encourage Bitcoin mining in El Salvador,” Brandel told Scriberr News.
Brandel explained that El Salvador is in a sticky place regardless of where they turn.
“Dollarization is not a great answer for them either. When you have another country’s currency as your own, you give up monetary policy, you give up the ability to change interest rates to be able to deal with problems that your economy is facing.” The volatility of bitcoin offers just as little control and less predictability.
According to Portillo, the Nuevas Ideas party, and the Salvadoran MInistry of Tourism, the tourist areas of El Salvador and certain areas of trade are set to benefit, and the new tender opens doors to foreign investors as well. But the country still has a long way to go before recovering from decades of inflation, dollarization and economic uncertainty.