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| El Salvador is the first country to adopt Bitcoin as its official currency |
After Central American countries were the first to introduce cryptocurrency as legal tender, Bitcoin is now the official currency of El Salvador alongside the US dollar.
President Ned said on Twitter that El Salvador is about to make history thanks to this initiative. He previously confirmed that he bought 400 bitcoins, which is roughly $20.9 million at today's price.
Proponents believe this will make it cheaper and easier for migrants to send money to El Salvador, which is significant because these remittances account for more than 24% of the country's GDP.
This decision also aims to improve citizens' access to financial services.
Strike is a digital finance company that is helping implement the new law. The CEO said that more than 70% of the country's workforce does not currently have a bank account.
However, some fear that the use of this historically unstable currency could harm the citizens of El Salvador and endanger economic stability.
The coin reached an all-time high of more than $60,000 in April, then lost nearly half of its value in the summer crash that followed.
The law caused rating agency Moody's to downgrade El Salvador's debt rating. The International Monetary Fund has also warned of destabilizing effects.
The law means that citizens can use Bitcoin to pay taxes. The store can display prices in digital currency.
There is also no capital gains tax on currencies that are exchanged for coins. With this decision, El Salvador is the first country to officially add Bitcoin to its balance sheet and incorporate it into its reserves.
El Salvador is the first country to adopt Bitcoin as its official currency
After a law was passed in June, El Salvador has been preparing to support cryptocurrency for months. Last month, it began installing 200 ATMs across the country to allow citizens to switch between the country's two official currencies.
It has also launched its own digital wallet called Chivo, which gives users $30 of Bitcoin for free to encourage adoption.
Despite all the measures taken, anecdotal evidence shows that few companies are ready for change.
The Financial Times surveyed more than 20 companies in the country's capital, and three said they wanted to accept the currency immediately. Other companies have yet to begin preparations or actively boycott cryptocurrencies.
A survey conducted by the University of Central America found that 70% of Salvadorans disagree with the decision to use cryptocurrency as legal tender.