Will Bitcoin become a Legal Tender in El Salvador?

by baaaawz

What will be the Economic Impact of Bitcoin in El Salvador?

The Economic Impact of Bitcoin in El Salvador appears to be huge. But no one would have thought that Bitcoin becomes a legal tender in El Salvador. 

The Bitcoin community is very excited about this excellent News. This will increase the usage of Bitcoin in El Salvador by a great amount and may help to stabilize the Bitcoin price in the long run.

On June 9, 2021, the Legislative Assembly approved the “Ley Bitcoin” (Bitcoin Law) introduced by Salvadoran President Nayib Buquele. In the near future, Bitcoin will become one of the most secure and widely accepted forms of currency in the country after the U.S. dollar. As for the rating agencies, they are still unsure of how to react to this news.

All sides are Concerned about Bitcoins in El Salvador

The prospects for economic development in El Salvador have steadily increased since Bitcoin (BTC) became its official currency: mining crypto coins using geothermal power from volcanoes, building Bitcoin ATMs, and reducing remittance costs.

Even so, international bodies (claiming they have the right to intervene) promise El Salvador there will be no hope, and there will be hell on earth. There are threats against the brave little Central American country from the International Monetary Fund (IMF) to the United Nations (UN).

Despite this, El Salvador has been using foreign currency (the U.S. dollar) exclusively as legal tender for nearly 20 years. These organizations seem unconcerned about the fact that Bitcoin has become a legal tender in El Salvador.

As of September 7, the Rating Agencies will join the howling wolves when the Bitcoin Act becomes effective, to be implemented 90 days after approval.

El Salvador could be downgraded by Fitch Ratings

According to a publication on Fitch Ratings’ website, it is concerned that Bitcoin will become El Salvador’s official currency.

Credit agencies in the United States seem to view virtual currency like Bitcoin as a risk to the country’s economies. To those of us in the crypto sphere, this shouldn’t come as a surprise:

“El Salvador’s recent legislation establishing Bitcoin as legal tender is likely to be negative for local insurance companies exposed to the new currency because of the higher risk of currency and revenue fluctuations, as well as additional regulatory and operational risks.”

Lei Bitcoin stipulates that, unless the business has access to the technology necessary for dealing with transactions, it is required that it accept Bitcoin as legal tender. However, they will be able to easily exchange those BTC into U.S. dollars if it suits them.

Fitch specifically expresses dissatisfaction with the “lack of previous or comparable use or adoption by central banks in other global financial markets.” 

Taking the first step and establishing precedents is necessary. I am amazed that a little country like El Salvador has raised the courage to lead the way in Bitcoin adoption.

It is not likely that this will help Fitch, which will be viewing Bitcoin as a risky asset, leading to further downgrading of the credit rating of the country’s insurers as a result (B-).

How will Bitcoin become a Legal Tender in El Salvador?

There will be a lot of friction in El Salvador between Bitcoin supporters and the local opposition until September 7 and possibly after that as local opponents also play into the hands of the supranational. 

Moreover, they will need to ensure that the adoption of Bitcoin is as frictionless as possible, to set an example and encourage other Latin American countries, which are already very sophisticated in terms of Bitcoin use, to take a step towards the adoption of this technology.

In El Salvador, Bitcoin is not yet legal tender which means that no one knows what the real effects will be if Bitcoin becomes legal tender. All of us, however, are in agreement that this is going to be a historic moment for Bitcoin. 

Nevertheless, we should expect a rise in the price of Bitcoin. If you don’t know how to make a profit from that excellent news, you may want to read our guide on how to trade Bitcoin for profit. This will help you to get started and understand why you should buy Bitcoin.

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