El Salvador on Tuesday became the first country in the world to adopt bitcoin as legal tender, which it claims will reduce the cost of processing billions of dollars sent abroad. But critics warned it could backfire WRITTEN »THE WOODWORKING - THE OWNER .
Led by the young, charismatic and popular President Nayib Bukele, the plan aims to allow Salvadoran savings of $ 400 million a year in remittance commissions, mostly from the United States.
Last year alone, remittances to El Salvador totaled nearly $ 6 billion, or 23% of its gross domestic product, one of the highest in the world.
Opinion polls suggest Salvadorians are wary of both bitcoin use and cryptocurrency volatility, which critics say could increase regulatory and financial risks for financial institutions. However, some residents are optimistic.
El Zonte is part of the so-called Bitcoin Beach which aims to make the city one of the first bitcoin economies in the world.
In anticipation of its release, the government has already installed an ATM of the Chivo digital wallet that will allow the cryptocurrency to be converted into dollars and withdrawn without commission, but Boukele on Monday eased public expectations for quick results and asked citizens to be patient.
On Monday, El Salvador bought the first 400 cryptocurrencies, temporarily pushing the price of bitcoin 1,49% higher (the rate reached $52.680). Cryptocurrency is inherently volatile. This spring, its price topped $64,000 in April and fell to nearly $30,000 in May.
Analysts fear the move to make bitcoin a legal tender alongside the dollar USA could cloud the prospects of El Salvador's bid to seek a more than $1 billion financing deal with the International Monetary Fund (IMF).
After Bukele's bitcoin law was passed, Moody's downgraded El Salvador's credit rating, and the country's dollar-denominated bonds came under pressure.
