El Salvador has become the first nation in the world to accept Bitcoin. Nayib Bukele, the president of El Salvador, passed the legislation on June 9.
PM Nayib Bukele Adopts Bitcoin in El Salvador
El Salvador brought a law to make Bitcoin cryptocurrency as a legal tender on June 9. The law will come into effect from September 2021. El Salvador PM Nayib Bukele made bitcoin cryptocurrency as a legal tender in his country. His enthusiasm for cryptocurrency has made El Salvador the first nation to accept Bitcoin cryptocurrencies. Bitcoin is the best cryptocurrency to invest in 2021, and El Salvador is the first nation to make use of the crypto market.
Bukele states that Bitcoin has a market cap of $680 billion. Even an investment of 1% in the small country of El Salvador would increase the GDP of that country by 25%. But critics argue that bitcoin holders will not be willing to invest in El Salvador.
Bukele states that many Salvadorans live abroad, and they send money to their families in El Salvador. The country received a remittance amount of $5.9 billion in 2020. It forms almost 23% of the islandâ€™s GDP.
Many countries are considering cryptocurrencies as legal tender. They provide speedy transactions in cross-border payment at lower costs. Â Countries like the European Union prefer to bring in cryptocurrency usage as the central currency. But they lack proper regulations to control the crypto market and have high volatility in prices, which keeps countries wary.
Bitcoin prices saw a volatile move in June 2021, ranging between $41,200 and $31,200. The erratic and wide fluctuation is the main reason why it should not become a legal tender, say experts.
Bitcoin Cryptocurrency Cannot Serve as a Legal Tender
El Salvador is a small country with a population of just 6.5 million. Â The currency used in this small country is called the â€śColonâ€ť. El Salvador abandoned the usage of the Colon in 2001, and the US dollar became its legal tender. El Salvador has gained attention as the first country to adopt bitcoin.
All economic agents are not willing to accept bitcoin as payment for goods or services rendered. Small vendors, farmers, and street hawkers will prefer traditional money for transactions. They are not equipped to handle crypto money, say analysts. Small businesses in El Salvador will face severe financial problems due to this move.
Nauru and Andorra are other small countries that do not have a currency of their own. They have adopted the US dollar.
Cryptocurrency fans have been enthusiastic about accepting crypto as a legal tender. But the complications related to it are increasing. Critics say that the weakness in Bitcoin will not make it a suitable central bank currency. It is best for speculation but not for everyday transactions, as crypto prices move with high volatility.
Complications of Bitcoin Payment
Though bitcoin is the best cryptocurrency to invest in 2021, there are various complications in accepting bitcoin payments.
The fluctuations in Bitcoin have made critics wonder about the safety of crypto as a legal tender. Bitcoin crypto prices moved within a wide price range of $38,200 and $31,400 in a single week in June. The central government does not prefer such volatility in currencies.
Crypto news brings wide fluctuations in Bitcoin prices. At times, cryptocurrency prices fluctuate widely on the same day, making every transaction complicated. The value of the Bitcoin on incurring the debt and its value when the debt falls due varies largely.
Such wide fluctuations may destabilize the economy, say experts. However, the crypto news has made El Salvador newsworthy.
Pros and Cons of Bitcoin
Bitcoin works on a Blockchain network that involves only the sender and the receiver. No third party is involved in it, and there is no central regulation to control its price fluctuation. All transactions are encrypted. The value of Bitcoin is uncertain with wide fluctuating movement. Investors are wary about such drawbacks in cryptocurrencies.
Many cybercriminals misuse cryptocurrencies. Transactions in crypto currency do not reveal the identity of the sender, which encourages hackers and fraudsters.
India and China oppose cryptocurrency usage. Money launderers have made illegal transactions in India using WazirX. China has opposed the crypto market and continues its crackdown on it. Both countries have a large population and impose strict regulations against the crypto market.
However, many companies are willing to accept crypto payments as it is considered the best crypto to invest in. Big companies like Amazon, Visa, and PayPal acknowledge cryptocurrencies as payment. Companies recognize the safety and viability of using bitcoin and show their acceptance of the crypto.
Bitcoin is the best crypto to invest in as it provides large profits when investors buy crypto currency at support levels. High volatility in cryptocurrency prices provides good profit for investors.
Bitcoin prices surged to a life high of $64,700 in April 2021. It slid to levels of $31,000 in June. On June 7, bitcoin prices moved to a low level of $31,000 and surged higher to $41,000 on June 14.
The highly volatile moves make people prefer traditional currencies offered by banks and other institutions for their transactions. They are safe and secure and do not fluctuate widely.