El Salvador to officially adopt Bitcoin as legal tender in September

Source: cnBeta

In September, El Salvador will become the first country in the world to allow Bitcoin to be used to pay for everything from haircuts to taxes. The International Monetary Fund has said widespread use of cryptocurrencies would threaten “macroeconomic stability” and could undermine financial integrity through their links to illicit activity.

The initiative by Salvadoran President Nabucquer, 40, builds on a pilot program at “Bitcoin Beach,” a surfing resort where locals pay in bitcoin and use it for daily transactions. The program was launched in 2019 with support from an anonymous U.S. bitcoin donor.

The president claimed that nationwide adoption of cryptocurrencies would help the 70% of the population that do not have access to traditional financial services. He did not rule out the possibility of converting part of the central bank’s reserves into cryptocurrencies.

He hopes to use the geothermal heat generated by volcanoes to mine Bitcoin in the country, and will provide people with $30 worth of Bitcoin to encourage people to use Bitcoin. Currently, 13 Bitcoin ATMs have been installed in shopping malls.

The plans have confused many in the financial community, and also bewildered Salvadorans, with the survey showing that more than 90% of respondents do not want to be forced to accept Bitcoin as a payment method.

“I think the market acceptance will be limited,” said Grace, head of Latin America at consultancy Eurasia Group. “There are still a lot of questions about whether it can really take off.”

But cryptocurrency proponents argue that Latin America’s history of financial collapse and hyperinflation makes the entire region an ideal melting pot for cryptocurrencies as ordinary people look for ways to protect themselves from destabilizing economic events. Bitcoin believers point to banks such as Citigroup considering launching crypto services as a sign that bitcoin is going mainstream.

Despite the skepticism, supporters are resolute. The owner of a bar in Mexico City called the Bitcoin Embassy has counted the ages of her customers, ranging from 78 to 16. “Crypto is not just a fad,” she said. “It’s here to stay.”