El Salvador is considering becoming the first country to accept Bitcoin as legal tender to protect the country from inflation.
According to CNBC, the President of El Salvador Mr. Nayib Bukele (Nayib Bukele) has indicated that he will propose a bill that will make Bitcoin legal tender, alongside the dollar USA. The government will partner with the digital wallet company Strike, to create a financial framework around the digital currency.
Strike founder Jack Mallers has argued that Bitcoin would help countries such as El Salvador protect themselves from the "potential upheavals" of inflation common to traditional currencies.
This move may not be as bold as it seems for a state like El Salvador. CNBC notes that remittances account for about 20 percent of El Salvador's gross domestic product and often involve high transaction fees as well as long delays. Bitcoin and other cryptocurrencies could make these transfers more practical and instant.
However, this is still an important bet. Bitcoin is not backed by a fixed value, such as gold or the government of a large country. Like other cryptocurrencies, it is highly volatile and with huge peaks and falls often associated with events that in some countries could be considered minor. A Bitcoin-based resident could be ruined if its value plummets.
If El Salvador's move succeeds, it could give Bitcoin and other cryptocurrencies another foothold in the financial world, making it easy for the world to work with an entire country. Just don't expect other countries to catch on to Bitcoin either. The federal one bank of the US, as its govt Swedens, for example, researches its own digital currency.
