Bitcoin Faces Biggest Challenge As EI Salvador Makes It Official Currency

On the 9th June, 2021 the president of EI Salvador (NAYIB BUKELE) officially announced that ‘Bitcoin’ as a legal tender in the Central American country after vote comes from congress. Also the EI Salvador is the first country in the world to formally adopt the virtual currency as Bitcoin.

Bukele’s ‘new ideas party’ enjoys a supermajority in the EI Salvadorian legislature, and thus there is a strong likelihood that law would be approved. This Central American country (EI Salvador) is became the first country in the world to formally adopt the crypto currency. Before the acceptance of the Bitcoin as a legal tender that means since 2001, EI Salvador has not had its own monetary policy and at that time they are having ‘US dollar’ as an Official currency.

EI Salvador with having population of 64 lakhs and also having an area slightly bigger than Meghalaya depends heavily on Remittances which is sent by Salvador from abroad. The contribution of these remittances is around 6 billion dollar which means more than 20% GDP of Salvador. The main issue that bukele raised that “a big chunk of those 6 billion dollars is lost to intermediaries.” So, by using this crypto( Bitcoin) whatever amount received by million families is equivalent of billions of dollars every year.

So according to this way the people of Salvador has increased their savings as well as they also get to know such crypto-market like how its work. However, some crypto-experts says that EL Salvador could have looked at other crypto options rather than using Bitcoin. The main reason of saying these things is Bitcoin has very “extreme volatility” in market & it directly impacted on economies of EI Salvador.

The one thing that is being noticed by me that only those countries are going to use crypto-currency which has some Economic problems or we can say some Uncertainty about the economy of their country. There are three places such as Cuba , Venezuela , Mexico where many are preferring virtual tokens that are decentralized and unregulated.

Thank you.

Regards,

Jay Basrani (Section K),

Kautilya,

IBS Mumbai.