El Salvador: bitcoin will be legal tender

Legal tender? In other words, it is an official means of payment in that State. Let us remember that to date, El Salvador has the US dollar as its legal tender. With which, now, you would have these two options as legal tender.

No country in the world has raised this before, what's more, many nations have considered cryptocurrencies too risky and volatile for people to decide to invest in them. They have carried out campaigns warning of its characteristics. However, it is clear that there are many other countries that have been friendly to its daily use.

Recently, we pointed out how it is that in a week and as a result of some tweets, its value fell by about $ 20,000 and there is no government entity that can control it (as is the case in the case of reserve central banks and legal tender currencies ). This currency is only controlled by its own market and is extremely sensitive to its changes.

How did we get to this? Last weekend, the President of El Salvador, Nayib Bukele, stated that “would make the cryptocurrency bitcoin legal tender in the country”. Although it still needs support from Congress and legal formalization.

How is the situation at home? To date, 70% of Salvadorans do not have bank accounts, therefore, the president indicated: “In the short term, this will create jobs and help provide financial inclusion to thousands of people outside the formal economy", he pointed with the BBC. He also indicated that the inclusion of said cryptocurrency would help “Salvadorans living abroad send payments home”. The latter is very important if we take into account that a large part of the Salvadoran economy depends on remittances (4 billion US dollars per year) sent from abroad, as pointed out by the aforementioned media.

On the other hand, President Bukele also reported on his alliance with the electronic payments company Strike for the implementation of a modern financial infrastructure in which bitcoin technology can be used, he said. CNBC. In this regard, the founder of Strike, Jack Mallers, stated: “What is transformative here is that bitcoin is both the largest reserve asset ever created and a superior monetary network. Holding bitcoin provides a way to protect developing economies from potential impacts of fiat currency inflation."

This last phrase resonates greatly. With the large number of Latin American states with “agitated” or “changing” economies, the percentage of inflation threatens to increase more and more, with which, the fact of considering this cryptocurrency as a reserve alternative could be interesting for many, not just for Salvadoran citizens. However, as always, we must not forget that this cryptocurrency has its own difficulties that we cannot ignore.

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Marilú Lazo
Lawyer from the Pontificia Universidad Católica del Perú (PUCP). Director of The Crypto Legal Blog, she has experience in corporate advice, consumer protection, as well as in matters of personal data protection and new technologies.

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