El Salvador is planning to make “Bitcoin a legal currency”

What is the News?

El Salvador is planning to make Bitcoin a legal currency. If made, then El Salvador will be the first country in the world to officially classify Bitcoin as a legal currency.

What did El Salvador do?

  • El Salvador is planning to make Bitcoin a legal currency. This means that the bitcoin must be accepted when offered as payment for goods and services. The tax contributors can also pay through bitcoin.
  • The US dollar will continue to circulate alongside Bitcoin as the national currency in El Salvador.

Note:

  • El Salvador has not had its own monetary policy since 2001 when it made the US dollar the official currency.
  • Along with Ecuador and Panama, El Salvador is currently among three nations in Latin America to have a ‘dollarized economy.

Read Also :-Bitcoins in India: An Overview

Why did El Salvador make Bitcoin a legal currency?
  • Fewer Remittances: The remittances in El Salvador account for roughly 20% of the nation’s gross domestic product. However, a large amount of this money gets lost in intermediaries fees. Hence, it is expected that Bitcoin adoption may make remittances quicker and cheaper.
  • More Independence: El Salvador is a dollarized economy. So, the fiscal and monetary decisions of the U.S. government and Federal Reserve have a tremendous impact on El Salvador. Hence, adopting Bitcoin could give the nation more independence.
  • Financial Inclusion: Nearly 70% of El Salvador’s population does not have a bank account and relies on the informal economy. So, Bitcoin will help increase financial inclusion in El Salvador.
Concerns against this move:
  • Legalizing bitcoin in the absence of a central regulating authority will have the potential for fraud and money laundering, high energy costs and extreme volatility.

Governments on Cryptocurrencies:

Read Also :-El Salvador becomes “Malaria-free Country”

About Bitcoin:
  • Bitcoin is a type of Cryptocurrency that enables instant payments to anyone.
  • Introduced in: Bitcoin was introduced in 2009. It is based on an open-source protocol and is not issued by any central authority.
  • Origin: The origin of Bitcoin is unclear, as is who founded it. A person, or a group of people, who went by the identity of Satoshi Nakamoto are said to have conceptualised an accounting system in the aftermath of the 2008 financial crisis.

Source: Indian Express

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