Here is Why El Salvador Made BTC a Legal Tender

In what appeared to be a bold financial move, El Salvador announced Bitcoin as its official currency. That’s a rare step among countries. The South American nation becomes the first government to make Bitcoin a law. Why the move?

The event took place in 2021 June, marking a turning point as far as the crypto world is concerned. Before the declaration, governments across the globe remained combative on cryptocurrencies. Their crypto regards ranged from banning the coins to allowing them for investment purposes, but not an official currency.

Salvadorians have the chance to use BTC for exchange purposes as the law goes into effect. The crypto will act as the dollar and the previously Salvadorian colon.

Why El Salvador Adopted BTC

  • Reduce Remittances Costs

First and foremost, the country’s economy relies on overseas remittances, accounting for about 25% of the nation’s GDP. That said, the charges related to sending remittances remain vital. The country’s president confirmed this through a tweet. Legalizing BTC will make the process less costly.

  • Magnify Financial Inclusion

Similar to most developing economies, El Salvador faces the issue of low bank penetration rates. That is due to insufficient financial infrastructure like bank branches. The president believes that adopting digital coins will alleviate such problems. Keep in mind that BTC does not require physical offices to access. Constructing physical braches is costly. Moreover, BTC does not need infrastructure such as roads. Such financial conveniences attracted Nayib Bukele, El Salvador President.

  • Boost the Country’s Economic Growth

The low yearly economic growth made El Salvador consider BTC as an official currency. Data from World Bank shows that the nation has struggled within the 4% GDP rates over the past ten years. Such issues come from monetary problems that forced El Salvador to adopt the United States dollar. For now, the government has decided to turn to BTC.

Though the multiple benefits, Bitcoin as a legal tender had its drawbacks. For instance, the government will have reduced monetary policies control by adopting BTC. Also, the volatile crypto nature threatens the nation’s economy.

For now, most LATAM nations remain alert on how El Salvador will go with Bitcoin adoption.

What are your views on the move by El Salvador to adopt Bitcoin as an official currency? You can comment below.

All trademarks, logos, and images displayed on this site belong to their respective owners and have been utilized under the Fair Use Act. The materials on this site should not be interpreted as financial advice. When we incorporate content from other sites, we ensure each author receives proper attribution by providing a link to the original content. This site might maintain financial affiliations with a selection of the brands and firms mentioned herein. As a result, we may receive compensation if our readers opt to click on these links within our content and subsequently register for the products or services on offer. However, we neither represent nor endorse these services, brands, or companies. Therefore, any disputes that may arise with the mentioned brands or companies need to be directly addressed with the respective parties involved. We urge our readers to exercise their own judgement when clicking on links within our content and ultimately signing up for any products or services. The responsibility lies solely with them. Please read our full disclaimer and terms of use policy here.

Leave a Reply

Your email address will not be published. Required fields are marked *