El Salvador Becomes First Country To Accept Bitcoin As Official Currency

As of today, Bitcoin is the official currency of El Salvador along with the U.S. dollar, after

This Central American country was the first to adopt cryptocurrency as legal tender.Three minutes before midnight local time, the country's president, Naid Bukele, tweeted that the country was about to "make history" with the move, after previously confirming that he had purchased 400 bitcoins, equivalent to about $20.9 million at today's prices.

Proponents of the move argue that it will be cheaper and easier for migrants to send money home to El Salvador, which is important given that such remittances make upmore than 24% of the country's gross domestic product, according to the World Bank.There are also hopes that this step could improve citizens' access to financial services.The CEO of Strike, a digital finance company that helped with the logistics of the new law, said that more than 70% of the country's "active population" currently does not have abank account.

El Salvador was preparing to support cryptocurrency infor several months. In August, 200 ATMs began being installed across the country, allowing citizens to make exchanges between the country's two official currencies. It also launched its own digital wallet called “Chivo”, which gives users $30 in Bitcoin to encourage adoption of the cryptocurrency.

But there are concerns that the adoption of such a historicalAn unstable currency could harm Salvadorans and threaten economic stability. In April, Bitcoin reached an all-time high – over $60,000 and then lost nearly half its value in a crash over the summer. The law contributed to ratings agency Moody's decision to downgrade El Salvador's debt rating, and the IMF also warned of its potentially destabilizing impact.

The law means that citizens will be able to paytaxes in bitcoin, and stores will be able to quote prices in digital currency. Money exchanged for this currency will also not be subject to capital gains tax. The move makes El Salvador the first country to officially have Bitcoin on its balance sheet and hold it as part of its reserves.

Source: cnbc, cnn, nayibbukele

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