In recent weeks, the first ‘bitcoin ATMs’ have appeared throughout El Salvador, but from tomorrow Salvadorans can really convert the crypto currency into hard dollars, or buy bitcoins. The Central American state – half the size of the Netherlands – is the first country in the world to make bitcoin legal tender. The current currency, the US dollar, will also remain valid.
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Resistance and ambiguity
A special event. But the introduction of the virtual currency has also sparked protest in the country, which has a long history of political unrest, corruption and gang violence.
This week, opponents of bitcoin’s adoption took to the streets, fearing that the currency’s wide swings in value leave poor Salvadorans vulnerable. A well-known critic of the government’s plans was suddenly arrested on suspicion of fraud.
Nearly 70 percent of Salvadorans are also against the introduction, according to a recent poll by the Salvadoran university UCA. Moreover, there is still a lot of uncertainty about the crypto currency among the population of the Central American country: nine out of ten respondents do not know exactly what the bitcoin is.
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Less dependent on dollars
So why is El Salvador taking this radical step? The controversial Salvadoran president Nayib Bukele says he wants to become less dependent on the dollar through bitcoin and hopes for more investment in El Salvador.
But perhaps the most important asset is the more than two million people of Salvadoran descent living in the US: the money they send to relatives in El Salvador accounts for a fifth of the economy. If they do this via bitcoin, they will save hundreds of millions of dollars in transaction costs every year, the president said.
No bank account
The first bitcoin ATMs would therefore mainly be placed in areas where many Salvadorans live with family in the US. Although 70 percent of the residents of El Salvador (nearly 6.5 million) do not have a bank account, from tomorrow they can get a ‘wallet’ on which the government will put bitcoin worth 30 dollars.
For example, Salvadorans can pay taxes and loans with bitcoins, while salaries and pensions are still paid in dollars. Some stores already accept bitcoins.
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Regional trend
El Salvador is not the only Latin American country that sees a future in cryptocurrencies, communist Cuba now also wants to allow cryptocurrencies.
Hyperinflation-ravaged and oil-rich Venezuela even made an attempt a few years ago to launch its own crypto currency, the petro, but it barely got off the ground. Meanwhile, the use of crypto has become common among more wealthy Venezuelans, as it allows them to circumvent their own floating currency.
El Salvador’s neighbor Honduras opened La Bitcoinera last week, an ATM where you can buy cryptocurrencies with local cash. And Panama is now also exploring the possibilities of crypto.
‘Publicity stunt’
The International Monetary Fund is not happy about countries like El Salvador making cryptocurrencies legal tender. According to the institution, these countries are going ‘a step too far’.
There are also concerns about President Bukele. Critics see him as a populist with authoritarian tendencies: the bitcoin plan would not be an inventive monetary plan for his country, but a publicity stunt.
Bukele, meanwhile, tries to tighten his grip on the country. Until now, a president in El Salvador could only serve one term, but a high court on Friday stretched this to two terms. Despite US criticism of this decision, Bukele, who came to power in 2019, can now run for re-election.
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