While El Salvador’s adoption of bitcoin has been hampered, the cryptocurrency’s future seems bright.
El Salvador’s Success
According to The Sun.com, El Salvador recently has become the only and first country to recognise bitcoin as a legal tender in the fall of last year.
El Salvador’s congress unanimously approved President Nayib Bukele’s proposal to accept various cryptocurrencies alongside the US dollar, heralding the move as a step toward financial inclusion and investment.
President Bukele stated that the inclusion of bitcoin will make it easier for citizens living abroad to transfer money home, claiming that the $4 billion (£2.8 billion) they send home each year amounts to 20% of the country’s GDP (GDP).
However, the law required firms to have the equipment to handle transactions, and there was a further complication: El Salvador had requested a $1 billion loan from the International Monetary Fund, which was ultimately denied.
The launch had been marred by issues, according to Katharine Wooller, managing director of crypto wealth platform Dacxi. On the platform where the bitcoin was held to end up crashing, a $30 incentive to set up a bitcoin account did not go over well.
“As with the introduction of the euro in the country of Europe, it has not been welcomed with universal enthusiasm – rather, some (mainly the older age) in El Salvador felt obligated to protest the policy in the streets,” she said.
Bitcoin surged from $42,600 at the time of the changeover to $65,500 a few weeks later, proving that the decision was correct. She pointed out that the increase was fleeting, and bitcoin’s price has now fallen to $43,700.
Despite its early difficulties, Ms Wooller believes crypto, bitcoin or the other currencies have a future as a legal, but decentralised, financial asset rather than a currency.
Although the volatility of bitcoin must be addressed majority city of people who hold it does so as a means of hedge against the inflation that can be expected. Thus use it as a store of value similar to gold rather than as a currency.
Because many of the world’s central banks are working on their version of a currency that is decentralised, Ms Wooller believes that regulation of bitcoin will arise.