Source: Beijing Commercial Daily
Original title: Bitcoin becomes legal currency, El Salvador eats crabs or opens the magic box
After the three-month notice, El Salvador officially became the first crab-eater. The first batch of 400 bitcoins has been received, the bitcoin wallet has been released, and the $120 million red envelope is on the way. In the history of the development of cryptocurrency for more than ten years, this unremarkable Central American country has already had a sense of existence. However, behind the convenient trading of cryptocurrencies, there is still the risk of ups and downs. It is still unclear whether El Salvador has tasted the sweetness or the bitterness.
Purchase 400 bitcoins
On September 7, local time, Salvadoran President Nayib Bukele got his wish. On the same day, the El Salvador Bitcoin Act came into effect, and Bitcoin became the country’s legal tender. As a result, the Central American country El Salvador has officially become the first country in the world to use cryptocurrency as legal tender.
The day before the bill came into effect, the Salvadoran government couldn’t wait to make a move.On the evening of the 6th local time, Booker was atTwitterA post stated that the government of El Salvador has purchased the first batch of 200 bitcoins and said it will buy “more” bitcoins. A few hours later, Booker added that the country had purchased another 200 bitcoins, for a total of 400.
At the same time, the Salvadoran government has also released a Bitcoin wallet called Chivo, which will support the adoption of Bitcoin in the country. The Salvadoran Congress also approved the establishment of a Bitcoin trust fund with a scale of 150 million US dollars. The funds will be disbursed by the Ministry of Finance. This fund will be managed by the National Development Bank of El Salvador.
Three months ago, the government of El Salvador passed the Bitcoin bill with 62 votes in favor and 19 against. According to this bill, Bitcoin will be regulated as the legal currency of El Salvador and can be used for commodity pricing, payment methods and tax purposes. Bitcoin transactions will not be subject to capital gains tax; the exchange rate between Bitcoin and U.S. dollars in the country is determined by the market. The bill also stipulates that the state will allow users to adopt alternative Bitcoin transactions and automatically convert Bitcoin into U.S. dollars when necessary.
As the main figure pushing the Bitcoin bill, Booker said that once Bitcoin is recognized as legal tender, Salvadorans will soon be able to convert Bitcoin into U.S. dollars. To achieve this goal, the Salvadoran government intends to install 200 Bitcoin ATM machines, and another 50 bank branches will also allow the public to exchange cryptocurrency into legal tender.
On the occasion of the official entry into force of this bill, in order to encourage people to use Bitcoin, Booker said that the government used to distribute “virtual currency red packets” worth $30 to up to 4 million people who registered to use Bitcoin wallets.
Currently, Bitcoin is gradually recovering. Since the end of July, the price of Bitcoin has resumed its upward trend from a low of $30,000 a few months ago, continuously breaking through key points, and breaking through the $52,000 mark in trading on September 6. As of 12 o’clock on the 7th, Beijing time, the intraday increase of Bitcoin was 1.94% to 52,680 US dollars per month.
Paving the way for foreign exchange
“In order to promote national economic growth, it is necessary to approve and authorize the circulation of a digital currency whose value is in full compliance with free market standards to increase national wealth and benefit the greatest number of residents.” At that time, regarding the original intention of introducing the Bitcoin Act, Booker gave this explanation.
Booker is firmly optimistic about Bitcoin investment. He has stated many times that if El Salvador receives 1% of the world‘s Bitcoin investment, GDP will increase by 25%. Bitcoin will likely become the fastest-growing transaction method for overseas remittances, increase the real income of informal employment and low-income groups, help promote financial inclusive development and national economic growth, and provide channels such as credit, savings, investment, and safe transfers. .
Li Daxiao, chief economist at Yingda Securities, said that as a transaction, Bitcoin does have its advantages, such as convenience and low cost. Compared with traditional trading methods, Bitcoin transaction fees are low, and the time required is shorter. Convenient.
For El Salvador, which focuses on remittances, Bitcoin’s transaction advantages do have merit. As a coastal country located in the northern part of Central America, El Salvador has a weak industrial economic foundation. The domestic economy is dominated by agriculture, and transactions are dominated by cash. More than 90% are settled in U.S. dollars, and about 70% of people do not have bank accounts or credit cards.
It is worth mentioning that the economy of El Salvador is closely related to remittances. Of El Salvador’s 6.7 million population, 2 million live abroad and continue to remit money domestically. Every year, immigrants remit US$4 billion to their home country, accounting for more than 20% of El Salvador’s GDP. In the first half of 2021 alone, El Salvador received US$3.6 billion in remittances.
Before the legalization of Bitcoin, El Salvador has tried to create more convenient conditions for cross-border payments in cryptocurrencies. For example, the cryptocurrency wallet Strike launched a mobile payment app in the country and opened the Bitcoin lightning payment function. In addition, the state-owned bank of El Salvador, Hipotecario You can also use RippleNet for real-time cross-border payments.
In Booker’s view, “using Bitcoin can avoid the loss of millions of dollars in the remittance process, and it can increase the total funds received by more than 1 million low-income households by billions of dollars each year… This will improve hundreds of millions of dollars. The lives and future of ten thousand people”.
In addition, Strike founder Jack Miles also mentioned that “holding Bitcoin provides a way to protect developing economies from the potential impact of fiat currency inflation.”
Undercurrent
The president tried his best to sell, but it didn’t mean that someone would pay the bill. A poll conducted by the University of Central America (UCA) showed that among the 1281 people surveyed, at least 67.9% said that they did not agree or strongly opposed the use of Bitcoin as legal tender, and more than 32% People say they agree to some extent.
In addition, 90% of people do not have a clear understanding of Bitcoin, and 80% of people say they have little or no confidence in the use of Bitcoin; most people (70%) think that legislators should abolish Bitcoin as a The law of legal tender.
Not only the people, but there are also opposition voices within the Salvadoran government. For example, opposition lawmaker Johnny Saul said that the bill was not fully submitted to experts and opinion polls, and many lawmakers voted in a hurry without knowing the content of the bill. It is worth mentioning that among the members of Congress, Booker’s party occupies 64 of the 84 seats.
The volatility of Bitcoin is worrying enough. Carlos Carcach, a professor at the El Salvador Advanced Institute of Economics and Business, said that Bitcoin is very volatile, which means that many investors face the “risk of being rich the day before and suddenly being poor the next day”.
According to Tang Duoduo, deputy director of the Macroeconomics Research Office of the Institute of Economics of the Chinese Academy of Social Sciences, the most basic requirement for a currency to be a national legal tender is stability, and Bitcoin obviously fluctuates too much and will be affected by various factors. This is the influence of external forces.
Jia Kang, the dean of the China Academy of New Supply Economics and a researcher at the Chinese Academy of Fiscal Sciences, also expressed similar views. Bitcoin is decentralized. It is a small-scale transaction and is prone to violent fluctuations. It is obviously not suitable as a national sovereign currency.”
In addition, Li Daxiao also mentioned that Bitcoin is also facing technical risks such as hacker attacks and password loss, as well as trend changes.
In fact, the International Monetary Fund (IMF) has warned that countries should not use encrypted assets as legal tender. The risks and costs outweigh the potential benefits, and the value of privately issued tokens may be very unstable. The violent price fluctuations will greatly weaken the government’s ability to maintain economic and currency stability, and even bring turbulence and chaos to the country.
Tang Duoduo bluntly said that most central banks are not very friendly to Bitcoin and crack down on Bitcoin trading activities. At the same time, central banks are also developing their own central bank digital currencies, issuing their own rules, which is completely different from Bitcoin. Countries are working hard to see who can be the best in nature, most conducive to transaction payments, and seize the commanding heights of future monetary policy.
However, the Salvadoran government also stated that people who do not choose to use Bitcoin can still choose to use the U.S. dollar, which is still another official currency of the country.
Beijing Commercial Daily reporter Tang Yitian
.