El Salvador on Tuesday becomes the first country in the world to accept Bitcoin as legal tender, despite widespread domestic skepticism and international warnings of risks for consumers.
President Nayib
Bukele's government claims the move will give many Salvadorans
access to bank services for the first time and save some $400 in fees on
remittances sent home from abroad every year.
For the first
time in history, all the eyes of the world will be on El Salvador. He started the ball rolling Monday
evening by announcing El Salvador had bought its first 400 Bitcoins, in two
tranches of 200, and promised more were coming.
El Salvador's 6.5 million people reject the idea and will continue using the US dollar,
the country's legal currency for the last 20 years.
This Bitcoin is a currency that does not exist, a
currency that will not benefit the poor but the rich," said skeptic Jose
Santos Melara, who took part in a protest by several hundred people in the
capital San Salvador last week.
"How will a poor person invest (in Bitcoin) if they
barely have enough to eat?"
In June, El Salvador's parliament approved a law to allow the crypto money to be accepted
as tender for all goods and services in the small Central American nation,
along with the US dollar.
The bill, an initiative of Bukele, was approved within
24 hours of being presented to Congress - where the president's allies have
held a majority since March.
Experts and regulators have highlighted concerns about
the cryptocurrency's notorious volatility and the lack of any protections for
its users.
Skepticism
The government is installing more
than 200 Bitcoin teller machines, some guarded by soldiers to prevent possible
arson by opponents.
And Bukele has promised $30 for each citizen who
adopts the currency.
These are decisions the administration and lawmakers
have taken without consulting the population, said Laura Andrade, director of
the Public Opinion Institute of the Central American University, which found in
a poll that 70 percent of Salvadorans opposed the move.
We see that people do not perceive a positive impact
to significantly transform their living conditions, she told AFP.
Nearly two-thirds of Salvadorans questioned for the
poll said they had no interest in downloading the Chivo electronic wallet
that will allow users to buy and spend Bitcoin.
Oscar Cabrera, an economist at the University of El
Salvador, said the currency's high volatility will have a "negative impact"
on consumers, affecting the price of goods and services.
The currency fell beneath $30,000 in June, less than
half its all-time high of more than $64,000 just two months earlier.
For its part, the Salvadoran Foundation for Economic
and Social Development (FUSADE) said it was "unconstitutional" to
make it compulsory for merchants to accept Bitcoin as a form of payment.
Malign actors
Bukele, who is popular but under fire in several
quarters for moves to tighten his grip on power, has accused opponents of
seeking to "sow fear" among Salvadorans, few of whom have access to
formal banking services. Remittances account for more than a fifth of GDP in
the dollarised economy, mainly sent in dollars via agencies such as Western
Union by an estimated 1.5 million expats.
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