El Salvador makes history and buys $ 21 million worth of bitcoin, becoming the first country to make the digital currency legal.
The South American country has formally adopted the world‘s most popular cryptocurrency as its fiat currency. The country has launched a wallet application called Chivo that citizens can sign up with a national identity document in order to transact using bitcoin.
El Salvador turning point: first country to legalize Bitcoin
In a series of tweets, President Nayib Bukele revealed that the country has bought a total of 400 bitcoins, the first step in a bigger push to add digital currency to its balance sheet. El Salvador is the first country to accept bitcoin as fiat currency, which will function alongside the US dollar. Advocates and critics around the world will be watching to see how this unprecedented experiment unfolds.
Bukele’s announcement marks a milestone for bitcoin, but not without criticism. Nearly 70% of the Salvadorans surveyed by the university disagreed with the administration’s decision to adopt bitcoin as fiat currency. Many were also unsure how to use digital currency.
Supporters of El Salvador’s move say the move indicates growing acceptance of bitcoin and that other countries may follow suit. The Salvadoran government hopes it will increase financial inclusion in a country where about 70% of citizens do not have access to traditional financial services. El Salvador’s Congress also passed a law to create a $ 150 million fund to help facilitate bitcoin-to-US dollar conversions.
But bitcoin is known for wild volatility at times, raising concerns about its effectiveness as a currency. “Bitcoin is not really designed to be a medium of exchange, so this is an early experiment,” Philip Gradwell, chief economist of the Chainalysis data platform, told CNBC. “The main use that will be made of it in El Salvador will really be around people who use it to save some wealth and maybe just to compete with the dollar in the country.”