El Salvador on Tuesday became the first country in the world to adopt bitcoin as a legal tender, after President Nayib Bukele announced on Monday that his government has purchased another 200 bitcoins.
Starting Tuesday, all “economic agents” will begin to accept the cryptocurrency as a form of payment, alongside the US dollar. Tax payments can also be made in bitcoin, according to the new law designating it as a legal tender.
Salvadorans will also be able to download the government application “Chivo Wallet” which will deliver USD30 worth of Bitcoin to people to promote its use.
El Salvador now holds 400 Bitcoins, which are worth nearly USD21 million at current trading levels.
Bukele said on Twitter that the country’s brokers “will buy much more as the deadline approaches.” Based on the Bitcoin price at the time of the tweets, the amount of the digital coin purchased totaled roughly USD20.9 million.
The price of Bitcoin rose following the president’s tweets and was trading at around USD52,681.85 at 04:16 a.m. GMT Tuesday, according to Coinbase.
Bukele, a right-wing populist who rose to power in 2019, announced the plan to start using Bitcoin in June. He said back then that El Salvador partnered with digital finance company Strike to establish the logistics of the decision.
Strike CEO Jack Mallers said at the time that more than 70% of El Salvador’s “active population” did not have a bank account.
Cryptocurrencies are held in digital wallets, rather than through a traditional bank account, meaning that people in poorer communities with less access to banks could use Bitcoin as a way to gain increased access to their finances.
However, social organizations have asked the Salvadoran government to repeal the law, largely because they fear the volatility of cryptocurrency.
While the price of Bitcoin has lately been trending back toward the all-time high of nearly USD65,000 it hit in April, it suffered a dramatic crash earlier this summer, when it lost more than half its value.
Cryptocurrencies are volatile, trading up and down like seesaws, often based on meme tweets from Tesla CEO Elon Musk.
El Salvador’s government is betting that through the use of Bitcoin as legal tender, new investments may be attracted. Authorities also hope to reduce commissions paid for sending remittances from abroad.
“The process of #Bitcoin in El Salvador has a learning curve. Every step toward the future is like this, and we will not achieve everything in a day, nor in a month,” Bukele tweeted. “But we must break the paradigms of the past.”
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