BTC

The big coin experiment: El Salvador becomes the first to adopt Bitcoin as legal tender

Wednesday, September 8, 2021 by Robinhood Snacks | Disclosures
_Not your average B-Day [MEDITERRANEAN/E+ via GettyImages]_

Not your average B-Day MEDITERRANEAN/E+ via GettyImages

"Happy B-Day"... Just got a whole new meaning. Yesterday, El Salvador became the first country to adopt Bitcoin as a national currency. Crypto enthusiasts call it "B-Day." Bitcoin is now legal tender alongside the US dollar, which has been El Salvador's official currency since 2001. The Salvadoran government is rolling out Bitcoin ATMs and snazzy kiosks — and offering a $30 BTC credit to those who download its govt-run Bitcoin wallet, Chivo.

  • Crypto pupusas: Salvadorans can now pay for anything in Bitcoin, from tortillas to rent. Twitter was flooded with images of BTC-bought McMuffins.
  • Crypto finances: Salvadorans can pay taxes and bank loans in BTC, and won't pay capital gains tax when converting to USD.

Crypto instead of cake... Not everyone's into it. El Salvador plans to spend $225M+ in the rollout, but ~65% of Salvadorans don’t want the govt to spend tax money on Bitcoin adoption, and 80% lack confidence in BTC. Meanwhile, the IMF is worried BTC's volatility poses major risks to El Salvador's economy, which is already one of Central America's poorest. A Bitcoin price plunge could make its huge debt load even worse. Just yesterday, BTC dropped 10%. Some potential pros...

  • Access: El Salvador's President says BTC will improve financial inclusion among the 70% of Salvadorans who don’t have access to traditional financial services.
  • Remittances: Because BTC is often cheaper to transfer, it could lower fees for Salvadorans abroad who send money to family in El Salvador. Nearly a third of the economy’s dollars come from “remittances.”
THE TAKEAWAY

It's the first big coin experiment... and the stakes are high. El Salvador's BTC adoption could destabilize its fragile economy, boost corruption, and be a boon to the Salvadoran president’s authoritarian tactics — or it could be a social and economic success. It’s all TBD. But the experiment could be valuable for other governments considering using crypto as legal tender.