Was El Salvador's Decision To Make Bitcoin Tender Legal Right Or Wrong?

El Salvador’s President Nayib Bukele created news when he announced that his country had passed a bill that makes Bitcoin tender legal on September 7, 2021.

Bukele first disclosed his intention to make the Bitcoin tender legal at the Bitcoin 2021 Miami conference. This move by the president attracted criticism from many, including top economists and the International Monetary Fund.

Many pointed out the highly volatile nature of Bitcoin, while many said that this would result in a rise in illegal and money laundering activities. But that didn’t stop the President from moving forward with his decision.

Why Was Bukele Keen On Adopting Bitcoin as Legal tender?

Bukele explained that his plans to pass Bitcoin legal tender are in compliance with his aim to make financial development in the rather underdeveloped country. Bukele said that this step aims to make financial services more accessible in the Latin American country, where more than 70% of the local population does not own a bank account.

Furthermore, Bukele said that the decision would also help the nation’s economy as it would improve remittances from abroad.

According to the president, the country would save $400 million in annual remittance commissions once Bitcoin is adopted as a legal tender.

After The Implementation Of Law:

The Chivo Wallet app was launched by the government of El Salvador after the law was implemented in September. Awareness Camps were held to teach citizens how to use the digital wallet in an effort to make the public familiarized with Bitcoin.

Users could also use the Chivo Wallet for zero charges to convert Bitcoin to dollars and vice versa. The app also enables users to send and receive either currency using the wallet.

Consequence Of The Decision

President Bukele has claimed several times that the decision has resulted in the country’s upliftment while the access to financial services also increased.

The El Salvadoran Minister of Tourism has also claimed that the decision has benefited the adoption of Bitcoin in the country. According to the minister, a rise of 30% is seen in tourist footfall as around 1.4 million people made the visit to the country.

However, even after the claims by ministers and governments, the country is still seeing low rates of GDP growth. In the last two decades, the growth rate of GDP has not increased by more than low single digits. In 2021, the GDP growth was just 4.2%.

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