September 7, 2022 marks exactly one year since El Salvador became the first country in the world to accept bitcoin as legal tender.
Exactly one year ago, after the decision of President Nayib Bukele, local legislators enacted a special bitcoin law. El Salvador became the first country to accept bitcoin as legal tender, along with the US dollar, which has been the official currency here for the past two decades.
The government has said that bitcoin adoption will benefit 70% of the local population, which, as of 2021, has been cut off from traditional banking. Under the auspices of the state authorities, a special Chivo cryptocurrency wallet was created, and every citizen of the country who joined the government’s initiative received the equivalent of $30 in BTC for use.
By January, the Chivo app had been downloaded more than four million times, Bukele said, an impressive number for a country of 6.6 million with a diaspora of nearly three million living abroad, mostly in the United States.
Citizens who have emigrated abroad do not lose touch with the country and traditionally continue to support their families in El Salvador. According to the finance department, an amount of 30% of El Salvador’s GDP is lost every year in paying commissions to various third-party agencies for transferring funds. In the understanding of Bukele, this is one of the reasons to legalize cryptocurrency: cheap money transfers through the Chivo application allow you to return all these funds to the country’s economy.
According to the Central Reserve Bank of El Salvador, citizens living abroad sent more than $50 million in commission-free money transfers through the Chivo app between January and May this year.
A year later, industry observers still have not come to a unanimous conclusion regarding El Salvador’s initiative.
Some experts, against the backdrop of high volatility in prices for crypto assets and the ongoing bearish trend, continue to call the adoption of bitcoins in El Salvador a “failed experiment”. So far, the country’s government has bought a total of 2,381 BTC, which, at current prices, has caused the country a loss of $62 million.
Other experts have suggested that it is premature to make an unequivocally negative review, as the long-term benefit from the widespread adoption of bitcoin far outweighs any short-term fluctuations in the value of the currency.
BitTorrent creator and Chia Network founder Bram Cohen believes that the number of benefits often “doesn’t really correlate with the amount of money they bring in.” In particular, according to Cohen, El Salvador, by making bitcoin legal tender, reduced the dependence of the country’s economy on the US dollar, and also provided more opportunities for the population to participate in the financial system, which will ultimately bring noticeable benefits.
In early 2022, President Nayib Bukele announced plans to offer the country’s citizenship to foreign crypto investors. In his opinion, the creation of a friendly ecosystem for foreign businesses will help attract more investment projects to El Salvador.
Source: Bits
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