Can Bitcoin ever be legal tender? El Salvador rollout raises questions

 Can Bitcoin ever be legal tender? El Salvador rollout raises questions

Can Bitcoin ever be legal tender? El Salvador rollout raises questions.

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Overview

While many jurisdictions around the world are wary of how Bitcoin would perform in real-world applications, El Salvador took the plunge to roll Bitcoin out as a legal currency, becoming the first country in the world to do so.

However, despite this being a significant moment, the rollout was hindered by technical glitches to the official wallet, causing Bitcoin’s price to fall by as much as 10%. Fortunately, these snags were sorted out and the country now holds 550 Bitcoin.

Factors that led to Bitcoin being adopted as an official currency

El Salvador indicated that the decision made to adopt Bitcoin as an official currency was brought on by two primary factors. The first revolves around the high reliance of El Salvador on remittances.

This is associated with inefficiencies that exist in the remittance system. Remittances account for 24% of the total gross domestic product (GDP) of El Salvador, as per the World Bank. With cryptocurrencies, there are fixed-fee remittances that are faster and more cost-effective than fiat currency options.

The second reason revolves around El Salvador’s attempts to recruit new enterprises by establishing itself as a country that welcomes and accommodates cryptocurrency transactions. The tender decision was driven by heated controversies both from within and outside the country.

While the International Monetary Fund (IMF) expressed concern, there were several protests in the country against the bill being passed, indicating the scepticism of El Salvadorians to accept bitcoin.

Despite this, more residents are being drawn in to accept Bitcoin through offers of $30 sign-up bonuses when they download and use the Chivo app to transact in Bitcoin.

While this marks a significant milestone for Bitcoin and cryptocurrencies, there are still some challenges that El Salvador faces such as limited internet connectivity and the fact that 70% of El Salvadorians do not possess a bank account.

Liezel Thorne

Liezel is a content writer with a passion for writing about the financial industry and corresponding markets. Her favorite topics include Forex, Stocks and Indices, Cryptocurrencies, and anything relating to trading technology – news, newest and latest tips, tricks, and trends. She has done extensive reviews on brokers, trading platforms (web, desktop, and mobile), and various other concepts involved with trading. As a student of Environmental management, she has a keen interest in geography, environmentalism as well as conservation of both fauna and flora.

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