BITCOIN AS THE SECOND LEGAL CURRENCY IN EL SALVADOR
On this occasion, dear readers, I bring you a topic that arouses much controversy in Salvadoran society and in the entire world and has to do with the decision of the Salvadoran state to make bitcoin legal tender in the country along with the dollar.
First, it must be said that at
the proposal of the Executive, the Legislative Assembly decided on June 8, 2021,
to make El Salvador the first country in the world to make bitcoin legal
tender, stating intensely that bitcoin would attract a lot of foreign
investment to the country and that in turn the compatriots who send remittances
from abroad could send them to El Salvador without the need to pay commissions
or fees for these transfers.
Second, it is important to
mention that the Salvadoran population took it with skepticism since it was
something unknown to the vast majority. However, the great government
advertising campaign was very large in order to convince the population to pay
using bitcoins, even creating a government application called Chivo wallet and
Chivo ATMs in which they could exchange dollars for
bitcoins.
Third, it is remarkable to see a
government strategy of giving 30 dollars in bitcoins for the consumption of the
population, promoting its use so that the government could say that it was
successful. However, this government strategy was a failure since 4 million
Salvadorans downloaded the App simply because they wanted the 30 dollars, not
because they were interested in paying for their purchases using bitcoins. In
my personal case I downloaded the App only for the 30 dollars and even I left
10 dollars in bitcoins to see if the price went up and thus earn more money.
However, at the end of November 2021 the price of bitcoin fell, and I never
used it again.
Fourth, it can be said that
economically speaking bitcoin has been a total failure since the government
invested 100 million dollars to buy 2,300 bitcoins and whose current price is
worth less than half of what the government paid for them. In addition, the
creation of a volcanic bond was expected to be issued in March of this year,
then it was said that it would be until September and until now nothing has
been known about it. The purpose of this bond was to pay debt and build the bitcoin
city that the government said would begin construction in 2022 and to date
nothing.
Fifth, the country received great
pressure from very powerful banking entities such as the IMF, the World Bank,
IDB and also risk rating agencies such as Moddy that declared El Salvador's
sovereign bonds as junk bonds devaluing their price to the lowest point.
However, the Salvadoran government withstood the pressure of these
international entities even knowing that they could deny loans for refusing to
repeal the bitcoin law.
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