Don’t be too surprised: El Salvador, a Latin American nation, became the first country in the world to accept Bitcoin as legal tender (aka. official currency) on Tuesday, alongside its existing national currency US dollar.
EI Salvador? Where’s it? Haha, many may not be familiar with this country. 🐿️ Squirrypedia:
- It’s located in Central America (between the US and Brazil), known as “the land of volcanoes” with frequent earthquakes and volcanic activity.
- But the country is also struggling with high rates of poverty, inequality, and violent crime.
So what does this mean for ordinary people?
People living there could now use Bitcoin to buy any goods or services within the country or even pay taxes to the government. 😲
- BTC ⇔ USD: There are over 200 Bitcoin ATMs placed across the nation so that people can exchange Bitcoin for US dollars anytime (with commissions tho)
Sounds exciting? There are also fears. Just imagine, your salary or income is paid by Bitcoin, and its value diminished or even crashed….terrible for me. 😰 Money from long days of work is gone…
- Biggest risk: Bitcoin’s value is so volatile and independent from this country’s central bank (= the value of currency can’t be adjusted by monetary policy).
- Roller-coaster:🎢 Bitcoin lost almost half of its value from April to May this year.
So that may explain why more than 70% of respondents in a survey said they would rather use US dollars instead.
Then why does its government still jump into this big test?
To save blns of commissions. 💰 Many of its citizens are actually working overseas and then send their money back home – this accounts for roughly 20% of its GDP! If they use Bitcoin, this could save USD 400 mln a year in fees for these transactions.
But the IMF and the World Bank gave warnings on the risks of using Bitcoin. Some opponents are also concerned that this would fuel money laundering.
🐿️ Squirry updating: Bitcoin’s price crashed on its first day, dropping as much as 17% as the roll-out faced technical glitches. A rocky start 🤦♀️