The central American nation today sets a world-first as it adopts the cryptocurrency for use across all goods and services – even taxes.
The move was pushed forward by President Nayib Bukele who has long sung the praises of the digital currency and has courted controversy throughout his tenure. For instance, this week he also called for mandatory retirement of judges over the age of 60 - meaning a dismissal of one third of judges currently serving.
Bukele has framed the adoption of Bitcoin over Twitter as needing to “break the paradigms of the past” and that “El Salvador has the right to move toward the first world.” The plan is reportedly aimed at reducing or eliminating the $400 million El Salvador spends annually on commissions for remittances - largely sent from the US.
The country’s legislature convincingly passed the law on June 9, with 62 in favour, 19 opposed and three in abstention. Yet, a report released by JP Morgan following the ‘Bitcoin Law’s’ passing found that a 54% of Salvadorans viewed the law as “not at all correct”, 24% felt the law was “only a little correct” and just 20% were in favour of its approval.
The International Monetary Fund (IMF) also warned of the risks that Bitcoin adoption could present given its volatile nature, and others have raised concerns that this new legal tender could tarnish El Salvador’s efforts to seek financing from the IMF. Moody’s also downgraded the nation’s creditworthiness when the Bitcoin Law was passed.
Author, advisor and global commentator on digital financial services, David Birch, is also sceptical about the move: "To my mind there is a very big difference between allowing people to use a new form of money if they want to (actually, bitcoin is not money, but that's a different point) and forcing people to use a new kind of money on pain of imprisonment or whatever. The former is what we might associate with democracy and freedom whereas the latter is what you might associate with North Korea or France."
Tweeting on his personal account last night, Bukele announced the nation’s purchase of 200 new coins, bringing its total holdings to 400 Bitcoin.