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El Salvador purchased nearly $20.9 million worth of bitcoins only one day before the world’s most popular cryptocurrency is legally adopted as legal cash. President Nayib Bukele announced the acquisition of bitcoins in a series of tweets on Monday, the first move in a wider campaign to include the digital currency on the country’s balance sheet. The tweets were sent out at different times. The quantity of bitcoin acquired was about $20.9 million, based on the bitcoin price at the time of the tweets. Following the tweets, the price of bitcoin climbed to about $52,681.85 at 12:16 a.m. ET Tuesday September 7, 2021.
The posts were made only hours before El Salvador’s bitcoin law, enacted in June 2021, went into force on Tuesday. El Salvador is the first country to recognize bitcoin as a legal tender, alongside the US dollar. Around the world, supporters and detractors alike will be waiting to see how this extraordinary experiment unfolds. Bukele’s declaration is a watershed moment for bitcoin. El Salvador has become the first government to list bitcoin on its balance sheet and keep it in its reserves. However, the move has sparked outrage across the country. The Central American University polled Salvadorans and found that almost 70% disapproved of the government’s plan to make bitcoin legal money. Many people also had questions about how to utilize the digital money.
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Supporters of El Salvador’s decision believe it shows that bitcoin is becoming more widely accepted, and that other nations may follow suit. According to the bitcoin law, the Salvadorian government expects that it would increase financial inclusion in a country where around 70% of residents lack access to traditional banking services. Prices can now be advertised in bitcoin, tax contributions can be made in bitcoin, and bitcoin exchanges will not be subject to capital gains tax.
El Salvador has established a wallet software called Chivo, which residents may sign up for using their national ID to conduct bitcoin transactions. In an effort to accelerate acceptance, users will get $30 worth of bitcoin when they sign up. El Salvador’s Congress enacted a bill on Tuesday to establish a $150 million fund to aid with bitcoin-to-dollar conversions. However, bitcoin is notorious for its erratic volatility, which raises questions about its use as a money. Bitcoin wasn’t meant to be a method of trade, so this is an early experiment for the currency, said Philip Gradwell, chief economist at data platform Chainalysis. I believe the primary usage in El Salvador will be for remittances and individuals utilizing it to save money, as well as possibly merely to provide some competition to the dollar.