Many countries are having different attitudes or regulations towards the crypto-industry but not any of them is as friendly as El Salvador’s new initiative which made Bitcoin recognized as legal tender in the country. The congressional hearing was conducted on June 8 and President Nayib Bukele’s initiative was accepted by the 84 available votes.
The president, in his official statement, declared that the administration that is working under his supervision has created an important historical event which is first and foremost, most beneficial and efficient for the citizens of El Salvador who are working and living abroad and want to transfer money to their families. Through this initiative, the involvement of third parties, such as banks or financial authorities is not necessary, which also allows people not to waste their money on commission fees or transaction fees that usually take several days for the transfer to arrive on the other persons’ account.
There are several important legal steps to take before in almost 80 days BTC will join the US dollar as legal currency. The whole process is dedicated to making the payments for goods and services available for BTC transactions, but in the beginning, not all of them will be able to provide such service due to the lack of suitable technology or infrastructure. As we know, BTC mining or transactions involve strong hardware and software technology which is not as easy to make as the common norm.
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Not only once did President Bukele have to state his opinion with proper arguments for his initiative and the main justification of his is that the financial innovation will bring inclusion, investment, and economic growth to the country. More than a half of the population will be able to engage in the final transactions without the need to go to the bank which also allows them to avoid the long bureaucratic procedures.
Why all those matters for El Salvador are the fact that the country is largely dependent on remittances or money transfers from abroad, accounting for 20% of the country’s GDP. more than two million Salvadoreans live abroad, however, they are still maintaining close ties with their family members who are staying in the country.
It is no surprise that the new initiative caused a lot of discussions and while some of them are praising the new initiative, others are utterly sceptical. The new steps should be considered as a major step forward for the economic growth and development of the country, however, there is price volatility on the other side. Other than that the industry was accused several times of being used for fraudulent activities, as well as the money laundering and scams and its use in gambling, however, according to the BitcoinCasinosReviews, the main reason for its implementation in the entertainment industry is the quick and easy transaction process and anonymity.
The BTC’s reputation in terms of fluctuations and volatility, as well as the speculations on the market, might be the deterring factor for the IMF to give the country the $1 billion loan, for which El Salvador has already made a request. One of the main reasons why some people might be skeptical about the whole crypto-industry or BTC is that they think the main idea of its creation and use is to replace the USD, which is highly unlikely to happen in the near future.
It is also true that the bitcoin price fluctuations themselves give the reasons for sceptical thinking as the price of the coin has dramatically increased over the past year. If in the last September price was fluctuating around 10,000 USD the same coin’s price in March reached its historical maximum, 64,000 USD, for which the main reason is that the whole industry is not regulated by any authorities. This is why a lot of banks in the whole world are trying to develop their own digital currencies which will take the plus sides of the current cryptocurrencies and will make their flaws more developed.
The response from the World Bank
The World Bank did not support El Salvador’s request to assist the country with the adoption of BTC as a legal tender. The world bank, which is an international lender, made the official statement about its own decision, stating that the main reasons for its refusal are the environmental problems that are caused by the BTC mining process and the lack of transparency of the whole transaction process.
Unlike the World Bank, the Central American government is working to adopt the new initiative and become the first authority in the world to legally accept virtual currencies. Not only is the initiative working to make the BTC a legal tender but to make it an alternative to the US currency and promote its widespread use. The advantage of virtual currencies over fiat currencies is vivid and the simplification of the transaction process is one of the biggest aims for now.
In order for El Salvador to make the currency the legal tender in the country needs several verifications and the World Bank’s position might deter this process and even the time frame, which the government stated would need to make things work. The officials from the World Bank are not supporting El Salvador with the loan, but they will be dedicated to assisting in a variety of ways, including currency transparency and regulatory process. The whole initiative will receive congressional approval within 90 days, and according to the new rule, all businesses will have to accept bitcoin as a payment method unless it has the necessary technology and infrastructure.
Summing It Up
Finally, to sum up, not everyone even a year ago would imagine that the whole crypto-industry would cause such a boom. The scepticism towards it still stays in its place, however, the whole pandemic and the wide acceptance of BTC in many companies, had a domino effect. People started thinking about the cryptos as a way to generate some financial profit, which was even more important during the pandemic since it resulted in the economic crisis.
More and more countries are starting to accept BTC as a payment method in a variety of their services, for example, the US, Japan, Switzerland, or Germany, however, El Salvador’s initiative was the first one of this importance. When we are talking about its advantages, we should also remember that the concerns that the whole industry is causing are serious and it needs to be fixed.