Cryptocurrency News

Adopting the bitcoin standard? El Salvador inscribes itself in the history books



The crypto space and the macroeconomic community continue to applaud El Salvador’s historic move Recognize bitcoin as legal tender. The Central American country has become the first country in the world to do so, and the move has started to take over some other Central and South American countries as well. move to the same event.

Unsurprisingly, the move has created waves in the cryptocurrency community with Bitcoin (B T c) supporters, in particular, highlighted the importance of legislative change in driving cryptocurrency adoption. There have been some critics who have highlighted the law’s potentially oppressive undertones, which have added intrigue to the situation, but the widespread response has been positive.

Things escalated rapidly in El Salvador after the country’s President Nayib Bukele announced – which took place during the Bitcoin 2021 conference in Miami – that the country’s Congress would vote on the new legislation. In the space of a few days, Bukele’s plan to make bitcoin legal tender became a reality as the Salvadoran Legislative Assembly voted in favor of the new law on 9 June.

The country’s president took things a step further when he tasked him with starting up state-owned power producer Lazio. Exploring the Possibility of Powering Bitcoin Mining Harnessing the rich geothermal energy of the country. Less than a day after a new geothermal well was drilled, Bukele said would power a bitcoin mining facility in the near future.

the move was even Immortal on the Bitcoin Blockchain By mining firm Poolin, which included a Salvadoran newspaper headline that read “Assembly Eprueba la le Bitcoin,” translated as “Assemblage approves bitcoin law,” in block 686,938 mined earlier this week. It is reminiscent of Satoshi Nakamoto, the pseudonymous founder of bitcoin, with a Times newspaper headline reading “The Times 03/January/2009 Chancellor on the Second Bailout for the Banks” in the Bitcoin Genesis block a decade ago.

Bukele also Pledge to help bitcoin users Migrating to El Salvador reporting the benefits of BTC no longer subject to capital gains tax. As things move at an alarming pace in El Salvador, it is worth taking a look at the widespread reactions of the cryptocurrency community and the echo of the newly passed legislation.

Overview of El Salvador’s Bitcoin Law

El Salvador’s Congress voted to pass President Bukele’s “Bitcoin Law”, which recognizes bitcoin as legal tender with the US dollar, with 62 out of a total of 84 votes in agreement with the new law.

the law will allow citizens Pay for goods and services in bitcoin, and Bukele also said that the Salvadoran government will guarantee the convertibility of bitcoin to dollars at the time of any transaction.

This is made possible by a $150 million trust set up by the Bandesal Development Bank of El Salvador. In short, the government will buy BTC from local people if they want to get dollars instead of BTC.

One point of contention is Article 7 of the law, which requires vendors or businesses to accept bitcoin as a means of payment from customers, as it is now legal tender. Monetary economist and historian George Selgin raised significant concerns over Articles 7 and 13 in a thread on Twitter, Suggestion That they are coercing, in that they will force all Salvadoran merchants and companies to accept BTC as a means of payment.

Article 7 reads: “Every economic agent must accept bitcoin as payment when a good or service is offered to him or her.” Article 13 states: “All obligations in money expressed in USD existing prior to the effective date of this law may be paid in bitcoin.”

The noted economist said the move was a “win for bitcoin”, but questioned whether it was a “victory for freedom”, noting that the articles would force Salvadoran businesses and sellers to accept BTC, regardless of whether whether they want it or not. Selgin argued that Articles 7 and 13, which “qualify as ‘legal tender’ provisions,” essentially “undermine free choice in currency rather than promote it.”

“It is a (relatively) rare instance that something is being made mandatory tender not only in settling outstanding loans but also in spot exchanges. As such it is even more contrary to the principle of choice in currency. Instead of allowing merchants to only accept BTC in payments, Article 7 forces them to do so regardless of whether they prefer to pay in USD (or anything else). Very few countries have such stringent legal tender laws, which in the past were the last resort of desperate governments.

The Economist called on cryptocurrency and bitcoin proponents to rally against and condemn these specific clauses in the law. His critique was widely shared and provides a healthy dose of perspective to a situation that has received a lot of positive press.

The wider community applauds El Salvador’s move

While Selgin’s argument raises some poignant questions surrounding El Salvador’s new currency law, there appears to be widespread positive sentiment towards the country’s swift move to accept bitcoin as legal tender.

Many leading cryptocurrency and bitcoin advocates have heralded this move as a significant step towards more widespread adoption and acceptance of the prevailing cryptocurrencies as a store of value and a means of payment. paolo ardoinoBitfinex’s chief technology officer told Cointelegraph that he believes the move will be a major step forward in providing financial freedom:

“Bitcoin being accepted as a legal tender by El Salvador is what we have said all along: Bitcoin has utility and is a viable alternative to fiat currencies. As we look at the implementation of digital currencies “Well, I believe we will see big steps for bitcoin. This is a big step forward for the financial freedom of humanity and a momentous moment for bitcoin.”

Humayun Shaikh, CEO of Fetch.ai, a company that makes artificial intelligence for blockchain, highlighted the importance of the first-mover advantage and suggested that countries like El Salvador would attract companies and individuals operating in the cryptocurrency space, adding: “ Some countries adopting bitcoin or even buying bitcoin to use it as a store of wealth will increase their wealth and give a positive impetus to cryptocurrency adoption.”

Jeffrey Wang, Head of Americas at Amber Group, echoed Shaikh’s sentiments in his correspondence with Cointelegraph, highlighting favorable regulatory moves as an important way to attract cryptocurrency and blockchain-focused businesses: “On the crypto industry The biggest hanging cloud is uncertainty. As a country moving fast to adopt it now can be a significant advantage for attracting capital and talent to your country.”

Wang also said that the rapid changes being made in the country could serve as a real-life test case for bitcoin to be adopted as legal tender, and for the country to become a hub for cryptocurrency businesses. likely to be a catalyst. to flourish:

“By adopting this early, countries like El Salvador can help boost their domestic economy by welcoming an industry that starts with miners where they can use ‘clean’ energy that can reduce the environmental impact of miners’ electricity use. This would also be a great initial test case to look at [Bitcoin] used as a medium of exchange. “

Ardoino also highlighted the role that cryptocurrency can play in helping Central and South American countries grapple with the long-term economic problems that have plagued their currencies and people: “Bitcoin has resonated for the benefits that This could bring in the tragedy that we have seen. South American economies. The region’s potential to bring financial freedom should not be underestimated.”

What can we expect in the short term?

With the new bitcoin law passed in El Salvador, there is now a keen interest in the short-term changes to be felt in the country and beyond. Sebastian Ramirez, Head of Business Operations at BitFlyer USA, told Cointelegraph that a large number of everyday individuals may become less skeptical about bitcoin and begin to see it as a viable alternative to their existing solutions and use it Can be seen as a better store of value.

Ramirez also said that the changes to the law in El Salvador could remove some barriers to entry, such as paying taxes when using bitcoin. He also recognized that a change in law may not lead to an immediate change in perception in the country and beyond:

“Most of the population still may not feel sane/comfortable enough to use bitcoin and bear its risks. I do not expect most locals to benefit from this change in the short term, but as the space grows and bitcoin becomes more stable, it will become a tremendous option.

Wang acknowledged that there may be some teething problems, as sellers and businesses in the country still need to set up the necessary infrastructure to accept BTC. In addition, people may be reluctant to spend their BTC on everyday purchases, given the growing use of the cryptocurrency as a store of value first and foremost: “I think for the majority, they will not be able to spend the long term. By the time we hold BTC for potential price appreciation so spending it to buy bread today when it could double in a week the opportunity cost would be enormous.”

IMF raises red flags

The speed at which El Salvador has passed its landmark bitcoin law has made it difficult for major financial and economic regulatory bodies to react or intervene. still, International Monetary Fund raised some concerns Around the move at a press conference on June 10.

IMF spokesman Gerry Rice said will be consulted with the Salvadoran government. The IMF is negotiating with the country give Over $1 Billion in Financing: “The adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis. Therefore, we are following developments closely, And we will continue our discussions with the authorities.”

Some in the global community have also raised questions about the timing of Bukele’s rapid adoption of bitcoin as legal tender alongside the US dollar. serviced As the reserve currency of the Central American country since 2001.

Ramirez gave his opinion on the timing of the move: “The main reason here is Latin America’s race to become a bitcoin hub.” “This announcement is putting El Salvador on the map and attracting a lot of foreign interest, which puts pressure on other Latin American countries that don’t want to be left behind,” he said.

related: Death knell for Chinese crypto miners? Riggs running after action against government

Shaikh believes that “as a PR move, the time was set to accommodate the Bitcoin Miami conference.” He further suggests that timing may also be a factor in the ongoing development in China, where the government is starting to take a harder line toward bitcoin mining operators:

“This news comes at a time of the closure of coal-based mining operations in China and a surplus of mining hardware that needs to be relocated. With an abundance of renewable geothermal energy, El Salvador benefits from these developments and improves the image of bitcoin mining as a ‘dirty’ process.

However, now all eyes are on El Salvador and Central America. The country is laying the groundwork for the adoption and widespread use of bitcoin as a means of payment and has promised to build the necessary infrastructure to facilitate large bitcoin mining operations powered by clean geothermal energy.