El Salvador Starts to Use Bitcoin as a Legal Currency

Lim, Do Yeub

(From Yonhap News)

The El Salvador government has decided to use bitcoin as a legal currency. It is the first case of declaring usage of bitcoin as a legal currency in the world. It has been about two weeks since the declaration, and the government and citizens of El Salvador are still in chaos.

How to recognize bitcoin is open to dispute. Some are saying we need to approve bitcoin as a legal and reasonable currency. On the other hand, some say it has too many variabilities so that approving it as a legal currency will induce confusion in the whole world. Most nations are recognizing bitcoin as an asset, not a currency. However, the president of El Salvador, Nayib Bukele, is a big fan of bitcoin. One of the reasons is the remittance fee. There are many people who are working abroad and sending the money to their families in El Salvador. The government wants to reduce the fee because it accounts for 24% of GDP. If bitcoin can act smoothly as a legal currency, there is no need to spend a tremendous amount of money at remitting service.

There are arguments about how this decision will affect the economy of El Salvador. According to recent news, some experts are expecting that the decision will reduce the huge amount of remittance fee and El Salvador will be able to regain its lost currency power and public trust. Nations such as Tanzania and Ghana are also considering adoption of bitcoin as a legal currency. Moreover, it is also possible to invigorate industries related to bitcoin such as mining and ATM service. Since El Salvador is suffering from a lack of competitive industry, it can be a good opportunity. On the other hand, some experts are warning that the rest of the world is not agreeing with the decision of approving bitcoin as a currency. Therefore, it might be difficult to use bitcoin as a currency if others are recognizing bitcoin as just an asset.

Some citizens of El Salvador who are opposed to the decision are participating in demonstrations nowadays. Moreover, due to the technological problem, an electronic wallet service which the government offers after the declaration has kept inducing errors. However, the government is continuing to purchase bitcoin as its price falls. The result of El Salvador bitcoin policy will be a hot issue from now on.