El Salvador’s president has stated that while the usage of the cryptocurrency Bitcoin will not be mandatory, but El Salvador plans to provide $30 Bitcoins to encourage its adoption.
Finance Minister Alejandro Zelaya announced on Thursday that the government will spend $120 million to create up to 4 million starting Bitcoin accounts, or “wallets,” though he doubts that many individuals will take advantage of the offer. The wallets will be called “Chivo,” a slang term for “cool” or “good”.
Accepting Bitcoin will be optional when the law takes effect in September, according to President Nayib Bukele. “No one will be forced to accept bitcoins if they don’t want to,” stated Bukele.
On June 9, El Salvador’s Legislative Assembly passed legislation declaring Bitcoin legal tender, making it the first country to do so. The $120 million for the accounts will come from the government’s general revenue, according to Zelaya. “Upon registration, the user will receive $30 in Bitcoins” to help promote the plan, according to Zelaya.
“We aspire to reach a maximum of 4 million wallets, which would require $120 million in funding, but I don’t think we’ll get there,” he said. El Salvador’s national debt has already reached alarming levels.
The business that has been operating a Bitcoin ATM in the Salvadoran beach resort of El Zonte for over a year has announced the installation of a second machine in the capital, as well as plans for at least a dozen more in shopping malls. The machines either exchange dollars for Bitcoin or receive dollars and credit them in Bitcoin.
In El Salvador, digital currency can be used in any transaction, and any firm must accept Bitcoin as payment, except for those without the necessary equipment. El Salvador’s currency will remain the US dollar, and no one will be forced to pay in Bitcoin, according to the legislation.
The market will determine the exchange rate between the two currencies, and all prices will be able to be stated in Bitcoin — while the dollar will remain the currency of reference for accounting purposes.
The government will promote training so that people can conduct Bitcoin transactions.
According to the Economy Ministry, 70 percent of Salvadorans lack access to traditional financial services, and the government “needs to legalize the circulation of a digital currency whose value only follows free-market conditions” in order to boost growth.
It would boost financial inclusion, investment, tourism, innovation, and economic development, according to the president. The bill created a government trust fund to ensure immediate conversion to US currency.
Last year, El Salvador received $6 billion in remittances from Salvadorans living abroad, accounting for nearly 16 percent of the country’s GDP. Bitcoin, according to Bukele, may reduce the costs of transferring money home.
Experts believe it’s unclear how the extremely volatile cryptocurrency can help the unbanked, and only time will tell if the new system leads to real investment in El Salvador.
If you find this article informative then do share it with your friends and family!
Also read: Salvadorans are converting their USD to BTC as Bitcoin interest increases
