Written By: Isha Goel | September 2 2021
El Salvador recently announced that it will be making Bitcoin a legal tender and the government’s decision has been met with intense backlash as citizens are concerned they do not fully understand the technology. As a result, protests have broken out on the streets to demonstrate their reluctance in adopting the new form of currency that proves less stable than the U.S. dollar.
Credit for Image: Euronews
How the Events Progressed
In the middle of the night on June 8, a law was passed by the government of El Salvador that mandated Bitcoin to be the legal tender within the country. The notion was heavily pushed and endorsed by the nation’s populist president Nayib Bukele to every economic agent providing goods or services. In hopes of easing more citizens into this new idea, the government even promised to put $30 into the wallet of every Salvadoran who downloaded the government’s cryptocurrency app.
While the president appeared to be a hero within the crypto community, his initiatives were not as well sought out within his own nation. Ever since the country had adopted the U.S. dollar in 2001, its average annual inflation rate had been ‘only 2.03 percent’ which was the lowest rate out of any Latin American country. Up until now, all currencies were legal to use in El Salvador so citizens began to question ‘Why change our dollarized competitive exchange-rate regime?’ Others are questioning how constitutional these changes would be. Due to this, Bukele has proposed amendments to the constitution that would ‘allow the government to grant legal tenders status to currencies that do not exist in a physical form.’ This major decision has affected the markets and will likely result in currency chairs and economic collapse. Not only would this negatively impact the Salvadoran economy, but would result in yet another wave of migrants from an unstable Central American failed state to the United States.
How is the Adoption Happening?
After the announcement took place, measures were taken by the government to ease the adoption of the new currency. For once, the country is installing 200 ATMs ahead of its Bitcoin adoption on September 7 that will work alongside the crypto app Chivo. The government has also agreed to create a $150 million trust (there is a possibility of a higher allocation in the future) that will facilitate exchanges between Bitcoin and the U.S. dollar for instant conversions, thus offsetting risk. President Bukele continues to emphasize that no one will be forced to use Bitcoin but the resistance among citizens still remains.
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