The impoverished Central American nation of El Salvador has just become the first country in the world to adopt bitcoin as legal tender.
El Salvador doesn’t have its own currency and has been using the US dollar for the past two decades.
Among other things, according to the law passed by El Salvador, prices can now be shown in bitcoin and merchants will have to accept cryptocurrency as payments. This also extends to tax payments.
The government also launched an official government-run wallet called “Chivo” to help facilitate bitcoin transactions in the country.
Despite concerns expressed by economists that the adoption of bitcoin as legal tender would lead to complications with the International Monetary Fund (IMF), El Salvador’s president Nayib Bukele, has fully embraced it.
The country is currently in negotiations with the IMF for a $1 billion loan, and the lender has criticized the bitcoin move.
While the president is fully on board, not all citizens are. The rendering of bitcoin as legal tender coincided with protests based on fears that El Salvador could not afford to gamble with cryptocurrency. A recent Central American University poll shows that nearly 70% of Salvadorans disagreed with bitcoin adoption, even with the government handing out $30 in bitcoin to every citizen. .
President Bukele announced earlier this week that the government-owned 400 bitcoin, roughly the equivalent of $21 million at the time. As of this morning, that 400 bitcoin is worth just $18.3 million. So already, the gamble doesn’t look good to El Salvadorans on the street.
Indeed, it was an unfortunate day to make bitcoin legal tender as the cryptocurrency took a tumble on its first day, shedding 20% at one point.
On Tuesday, bitcoin slid to its lowest in nearly a month, falling from $52,000 to under $43,000 at one point. By Wednesday, it had recovered to around $45,900.
Bukele used this opportunity to buy on the dip, announcing to the public that the government had purchased an additional 150 bitcoin.
The prices of Ethereum and Dogecoin also fell this week. In all, in the last 24 hours, a total of $410 billion was wiped out from the $2 trillion crypto market.
Meanwhile, another Central American nation--Panama--is also preparing to adopt bitcoin as legal tender.
On Tuesday, Panamanian Congressman Gabriel Silva introduced a bill that would regulate the use of digital currency within the nation. The proposed bill would recognize bitcoin as a national alternative payment method.