El Salvador this week became the first country in the world to declare Bitcoin the official currency. But critics of the decision worry that a lack of transparency over the currency could spur increased criminal activity in the country.
As of September 7, Bitcoin is a currency that can be used for any financial transaction in El Salvador, making it the first country in the world to make such a decision.
Shortly after this decision, the value of Bitcoin fluctuated sharply overnight, an example of instability, which has caused concern among a large part of the population. Country President Nayib Bukele made the announcement in June, presenting the idea as a way to bring more financial freedom to those living in the country.
Mr Bukele said the cryptocurrency, created to operate outside of government-controlled financial systems, would help attract investment and save Salvadoran money when they transfer revenue from the United States to relatives. their in El Salvador.
Garrick Hileman is the head of the research department at the financial services company on cryptocurrencies “Blockchain.com” and an associate of the “London School of Economics”.
“There are very practical aspects to this movement. “One is related to the very high costs to income coming from abroad, at a time when they make up a very significant percentage of El Salvador’s economy, with estimates of 20 percent or more coming from emigration.” he says.
According to data, about 70% of Salvadorians do not have a bank account. Mr. Hileman says that this decision can also bring benefits in terms of financial education, to understand how money can be managed.
“Gaining financial knowledge is a global challenge, especially for a country like El Salvador, where very few people have access to the financial system.”
The launch of Bitcoin started with oscillations and obstacles in the first hours. President Nayib Bukele announced that the digital portfolio used for transactions was not working.
The president of El Salvador spent part of the day offering technical support as the country entered the world of cryptocurrency.
He informed the public about what was happening through his Twitter account with more than 2.8 million followers.
Mr. Bukele explained that the Chivo digital wallet had gone out of business as the server capacity had increased.
He encouraged followers to download the app and make comments about how things were going.
The government has promised to install 200 Chivos automatic counters and 50 Bitcoin customer care centers.
The government has announced it will support Bitcoin with a $ 150 million fund. To stimulate Salvadoran people to use cryptocurrency, it is also offering $ 30 to those who use Chivon, the digital wallet.
Despite the volatility of Bitcoin on Tuesday, Garrick Hileman believes that the announcement of the president can create a positive moment, which according to him will increase the value of Bitcoin and encourage a culture of saving.
“It could stabilize or increase the price of Bitcoin. Surely that would make it possible to have Bitcoin, which I think is in the best interest of the middle El Salvador families.” he says.
Three recent polls show that the majority of El Salvador’s population disagrees with the government’s decision to turn Bitcoin into an official currency.
In June the Legislative Assembly passed a law on Bitcoin, and the US Federal Reserve is providing technical assistance to the government.
The law states that Bitcoin can be used for any financial transaction and any business with the technological capability to do so must accept payment in cryptocurrency.
Critics have warned that the lack of transparency regarding the currency could spur criminal activity in the country and its strong fluctuations could quickly erode the savings of those who use it.
“For years, illegal activities carried out with Bitcoin have been hit. “But we have to see if El Salvador can be similarly effective in preventing it from becoming a haven for illegal activities, or money laundering.” says Hileman.
Bitcoin joins US dollar as El Salvador’s official currencyFLY
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