El Salvador is a small country in Central America. Yet, it has become the first country in the world to adopt bitcoin as legal tender. After touching a record in the last three weeks, Bitcoin price jumped above $36000 on June 10, and it climbed to $37,182.49. It was also up around 30.8% from the year’s low of $27,734 on January 4. The sudden surge occurred when El Salvador made Bitcoin a legal tender.
Now the bitcoin will have equal purchase value with the dollar in El Salvador’s law. El Salvador’s President Nayib Bukele likewise hyped the uses of the world’s largest cryptocurrency, with its potential for helping Salvadorans live abroad to send payments back home. These Bitcoins are basically computer files that are stored in a digital wallet app on a smartphone or computer. So, people can send Bitcoins to other digital wallets, and every single transaction in this is recorded in a public list called the blockchain. Presently, the bitcoin has become a legal currency in El Salvador. A majority of the lawmakers, with 62 out of 84 votes, were in favor of the initiative to approve crypto as a legal tender in El Salvador.
After El Salvador made its decision to make Bitcoin a legal tender, the International Monetary Fund (IMF) has seen some legal and economic issues with it. During a scheduled press briefing, IMF spokesperson Gerry Rice said, “Adoption of bitcoin as legal tender raises a number of the macroeconomic, financial and legal issues that require very careful analysis. We are following the developments closely, and we will continue our consultations with the authorities”. He also said that IMF will meet with Bukele to discuss the bitcoin law.
El Salvador is in discussions with the IMF seeking a near $1 billion contract. Several foreign investors, disturbed about the expected IMF contract they perceive as key for El Salvador, have demanded progressively higher premiums to hold Salvadoran debt. The Research head at Emso Asset Management, Patrick Esteruelas said that “Crypto is a very marginal story to the Salvadoran investment thesis”. He also said that “Whether El Salvador is going to be attractive for investors or not is going to depend on Bukele’s ability to use his unquestionable political capital to bring a large consolidated fiscal deficit into control”.
All the major cryptocurrencies across the world, Ether, Dogecoin, Binance, Cardano, and XRP, saw an 8% increase after El Salvador’s historic decision. These Cryptocurrencies are a type of currencies that uses digital files as money. Generally, these files are created using the same ways as cryptography, the science of hiding data. Ether, a coin linked to the Ethereum blockchain network of crypto, edged higher after bitcoin became legalized, and this second most popular cryptocurrency was trading 5.27% higher at $2,566.40 after the decision. While the Dogecoin, which was created as a parody cryptocurrency, increased 7.59%. And Binance Coin grew by nearly 10%.
The crypto use decentralized control, which means that they are not controlled by one person or the government. Some experts have also claimed that bitcoin headings of El Salvador could complicate discussions with the IMF. The law by itself does not relieve doubts about the usefulness of the project nor add any word that the expansion will put the IMF program back on track.
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Reference:
- www.reuters.com
- www.moneycontrol.com