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  07 Sep 2021, 10:44

In world first, bitcoin becomes legal tender in El Salvador

 SAN SALVADOR, Sept 7, 2021 (BSS/AFP) - El Salvador on Tuesday becomes the

first country in the world to accept bitcoin as legal tender, despite
widespread domestic skepticism and international warnings of risks for
consumers.

   President Nayib Bukele's government claims the move will give many
Salvadorans access to bank services for the first time and save some $400
million in fees on remittances sent home from abroad every year.

   "Tomorrow, for the first time in history, all the eyes of the world will
be on El Salvador. #Bitcoin did this," Bukele said on Twitter Monday.

   He started the ball rolling Monday evening by announcing El Salvador had
bought its first 400 bitcoins, in two tranches of 200, and promised more were
coming.

   The 400 bitcoins were trading at around $21 million, according to the
cryptocurrency exchange app Gemini.

   Recent opinion polls showed a majority of El Salvador's 6.5 million people
reject the idea and will continue using the US dollar, the country's legal
currency for the last 20 years.

   "This bitcoin is a currency that does not exist, a currency that will not
benefit the poor but the rich," said skeptic Jose Santos Melara, who took
part in a protest by several hundred people in the capital San Salvador last
week.

   "How will a poor person invest (in bitcoin) if they barely have enough to
eat?"

   In June, El Salvador's parliament approved a law to allow the crypto money
to be accepted as tender for all goods and services in the small Central
American nation, along with the US dollar.

   The bill, an initiative of Bukele, was approved within 24 hours of being
presented to Congress -- where the president's allies have held a majority
since March.

   Experts and regulators have highlighted concerns about the
cryptocurrency's notorious volatility and the lack of any protections for its
users.

   - Skepticism -

   The government is installing more than 200 bitcoin teller machines, some
guarded by soldiers to prevent possible arson by opponents.

   And Bukele has promised $30 for each citizen who adopts the currency.

   "These are decisions the administration and lawmakers have taken without
consulting" the population, said Laura Andrade, director of the Public
Opinion Institute of the Central American University, which found in a poll
that 70 percent of Salvadorans opposed the move.

   "We see that people do not perceive a positive impact to significantly
transform their living conditions," she told AFP.

   Nearly two-thirds of Salvadorans questioned for the poll said they had no
interest in downloading the "Chivo" electronic wallet that will allow users
to buy and spend bitcoin.

   Oscar Cabrera, an economist at the University of El Salvador, said the
currency's high volatility will have a "negative impact" on consumers,
affecting the price of goods and services.

   The currency fell beneath $30,000 in June, less than half its all-time
high of more than $64,000 just two months earlier.

   For its part, the Salvadoran Foundation for Economic and Social
Development (FUSADE) said it was "unconstitutional" to make it compulsory for
merchants to accept bitcoin as a form of payment.

   - 'Malign actors' -

   Bukele, who is popular but under fire in several quarters for moves to
tighten his grip on power, has accused opponents of seeking to "sow fear"
among Salvadorans, few of whom have access to formal banking services.

   Remittances account for more than a fifth of GDP in the dollarized
economy, mainly sent in dollars via agencies such as Western Union by an
estimated 1.5 million expats.

   According to World Bank data, El Salvador received more than $5.9 billion
in 2020 from nationals living abroad, mainly in the United States.

   And the country is relying on this money to boost a struggling economy
that contracted 7.9 percent in 2020 due in large part to the coronavirus
pandemic.

   Economists and international bodies such as the World Bank, International
Monetary Fund and Inter-American Development Bank have expressed concerns
about El Salvador's bitcoin adoption.

   The United States has urged El Salvador to ensure a "regulated,"
"transparent" and "responsible" use of bitcoin, and to protect itself from
"malign actors" such as hackers seeking ransom money.

   Bitcoin is criticized by regulators for its potential for illegal use --
notably in laundering money from criminal activities and financing terrorism.

   But not everyone is against it, and according to Bukele in late June, some
50,000 Salvadorans were using bitcoin.

   Many of them are in the coastal town of El Zonte, where hundreds of
businesses and individuals use the currency for everything from paying
utilities bills to buying a can of soda.

   Started as a project by an anonymous bitcoin donor, the town until
recently boasted El Salvador's only bitcoin teller machine.

 

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