Bitcoin in El Salvador: How it Happened & What it Means!!
💵El Salvador’s Monetary History💵
Once upon a time, El Salvador had its own national currency called the Salvadorian Colon. The Colon collapsed after the Salvadorian civil war, and El Salvador adopted the US dollar as its new national currency in 2001
🏖El Salvador’s Bitcoin History🏖
El Salvador’s Bitcoin history begins with an anonymous American who wanted to create a small-scale economy that runs entirely on Bitcoin. He donated millions of dollars in BTC to turn the town of El Zonte into Bitcoin Beach.
👨💻El Salvador’s Bitcoin Adoption👨💻
Bitcoin Beach turned a lot of heads in the crypto industry, and it inspired some companies to carve out their own crypto niche in the country. One of these companies was Zap which decided to deploy their Strike app in El Salvador Zap and Strike CEO Jack Mallers was asked by Salvadorian president Nayib Bukele to help him write the bill to make Bitcoin legal tender and set up some of the infrastructure to make it possible.
⚖El Salvador’s Bitcoin Bill Explained⚖
First, BTC can be used to pay for all goods, services, taxes, and past, present, and future debts. Second, BTC will not be subject to any capital gains tax. Third, all businesses must accept BTC by law, and if any business do not want to keep BTC on their balance sheets, the government will provide them with ‘instant convertibility’ to USD. Fourth, the government will provide cryptocurrency training and education for both individuals and institutions. Fifth, the government will provide the necessary infrastructure to facilitate all the above. And finally, the government will create a special Bitcoin trust, something which happened shortly before the law came into effect.
🚫Criticisms Of El Salvador’s Bitcoin Adoption🚫
Almost every financially involved international organization you can think of has criticized El Salvador’s move to make BTC legal tender, including some of its citizens which are concerned about the effects it could have on the country’s economy.
👨🏫President Nayib Bukele’s Response To Critics👨🏫
Banks have had 20 years to roll out their infrastructure to Salvadorian citizens, yet 70% of them remain unbanked. As such, they have no right to complain about El Salvador’s BTC adoption according to Nayib. Nayib also rightfully points out that most of these same critics don’t know how the regular financial system works either. Nayib thinks these concerns will all but disappear once people see the practical effects of the Bitcoin bill, notably the inflow of human and financial capital from overseas.
🕵️♂️Risks Of El Salvador’s Bitcoin Adoption🕵️♂️
Besides Bitcoin’s volatility, the biggest risk to El Salvador’s Bitcoin adoption is centralization, specifically of the lightning network payment channels that all the country’s wallets will use. Most of these wallets are custodial and require some form of KYC, which could present other issues in the future.
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📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.
