El Salvador is one of the most underdeveloped countries in Central America, and it's hoping to use Bitcoin as a way for its economy to grow. On September 7, 2021, El Salvador became the first country in the world to adopt bitcoin as its legal currency alongside the US dollar. This decision made by President Nayib Bukele is intended to revolutionize how people do business and conduct transactions with one another all over Latin America.
The government has gone one step further in encouraging residents to utilize bitcoin by offering $30 in free bitcoins to those who sign up for Chivo ("cool" in English), the government's national digital wallet.
The Chivo wallet has a function that allows users to store their bitcoins as well as convert bitcoin transactions into US dollars, which they can later withdraw at 200 of El Salvador'sBitcoin ATMs. This is just one way they hope to promote the new national currency & give more people access to it.
According to reports from local media, the Chivo wallet has alreadyreached half a million users. The country introduced the wallet on Sept 7.
The Salvadoran government hopes this project will give many of their people access to banking services for the first time, and it is expected that they'll shave millions off commissions on remittances with a rise in this new payment processing.
If you aren’t a citizen of El Salvador, you aren’t out of luck! In an effort to boost their Bitcoin industry, President Bukele has announced that he will allow foreign capital into the country with a slew of benefits.Permanent residency is being grantedto foreigners who are investing at least 3 bitcoins in the country and have an entrepreneurial venture. "There will be no taxes to pay on either the capital increase or income," said a legal adviser for President Bukele.
The Salvadoran government has also announced that it will be actively tracing Bitcoin transactions on El Salvador's official BTC wallet, Chivo. The country is taking precautions against the potentially illegal use of cryptocurrency with these new measures from international institutions and they have already begun implementing them in order to combat money laundering risks.
El Salvador's decision to make Bitcoin a national currency has been met with enthusiasm by many of its citizens. The government is looking at other ways they can integrate cryptocurrencies into the economy and one way is to start using power derived from the nation’s volcanoes for cryptocurrency mining in an effort to reduce emissions associated with greenhouse gases like carbon dioxide.
Bitcoin mining, a process in which computers solve complex algorithms to generate bitcoins by verifying transactions and creating new coins; has been criticized for its detrimental environmental impact. Proponents of Bitcoin say their cryptocurrency could lead towardsmore renewable energy projectssuch as the one announced this week by the El Salvadorian government.
It's unlikely that many nations will follow El Salvador's example. Most governments are dedicated to creating their own central bank digital currency (CBDC), as we've seenwith the United Kingdom. Those that have accepted cryptocurrencies as an asset class have done so reluctantly and are attempting to construct a regulatory framework.
That being said, this move by El Salvador may provide some surprising outcomes. If Bitcoin becomes the medium for cross-border transactions, this might encourage additional countries to do so as well. This is certainly a monumental milestone for Bitcoin and will only further legitimize it as a financial asset.