Bitcoin- a Digital Currency
Universal Legal Currencies are rare in the world. Currently, Bitcoin, a digital currency, is in full swing. It has left people wonder. El Salvador in Central America is a classic example of how this currency has changed the lives of its people. The heart of this article is to weigh a little based on this little poor country and how it has accepted Bitcoin as their legal currency.
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Bitcoin
Bitcoin, presumed to be developed by Satoshi Nakamoto, is a currency, but it is often used for trading. If you are doing well in the market, you earn good returns and risk is also a concrete factor involved. Despite the fact that it is a currency, it turns out that. it is not accepted as a currency in many countries. This currency was invented to have a global impact and simplify the exchange of value and commodities. However, people and countries often find it unreliable. Imagine you are traveling around the world and Bitcoins are used as currency all over the world. All you have to do is scan the QR code to pay for a service. It's a dream. But this dream has come true now. There is a country, that has already legalized this cryptocurrency as legal tender. And that country is "El Salvador". This is a country that has agreed to use Bitcoin in its cash system. El Salvador, a country in Central America, is a small and poor country. Why did it legalize this currency? What made it to trust this digital currency? The answers will be discussed here.
El Salvador
El Salvador is a small country located near Hawaii. 70% of the people in this town do not have bank accounts. As a result, they had no way of putting money aside. One of the key motivations for making Bitcoin official is to address this issue.
The country was in the midst of a serious financial crisis during COVID-19. In the health-care and public-sector sectors, there was no adequate investment. When the epidemic hit, the economic damage was amplified. Bitcoin appeared to offer a way out of the financial crisis for the government. They discovered Bitcoin to be the answer. This was the second major factor.
The majority of the people who lived there were expatriates. Banks imposed service fees when expatriates transferred money to their family in El Salvador. This was a loss for the families. With this insight, the government took the choice to save citizens' money. Bitcoin had all of the characteristics desired by the government. This was the third and most important reason for using Bitcoin as legal money.
Bitcoin received the official trading grade for all of these reasons.
These decisions, however, were not made in a single day. The government decided to evaluate its limitations, depth, and reliability by conducting an experiment.
El Salvador Experiment:
Instead of the entire nation, El Zonte, a tiny city on the country's coast, was chosen. The town was so small that just 3000 people lived there. For the entire town, there was only one ATM, and it was a bitcoin ATM. A visitor who wished to remain anonymous donated the bitcoins he had to everyone's digital wallet. The Story of Bitcoin trading in the country began here.
Furthermore, the government gave Bitcoin an official authority in this region to try it in this city. In that country, digital wallets like as "strike" were also gaining popularity.
As a result, Bitcoin became a more popular transaction platform. The use of bitcoins in the city began with recreational activities like surfing and progressed to grocery shopping. If the notes were required, individuals would go to bitcoin ATMs and withdraw dollars instead of bitcoin.
Journalists who learned about the project went to conduct research. People have stated that using bitcoin has led them to save money. Despite the volatility of the bitcoin market, they continue to accept it as a means of saving. Because of their simplicity, Bitcoin transactions were also very easy to use.
The Bitcoin Bill and the Expectations of the Government:
Given the success of this trial, the government decided to adopt a "Bitcoin Bill" across the country in June 2021. As part of this, it has installed 200 Bit-Coin ATMs around the country.
This law has been heavily watered down by the government. They believe that this is the only way to get out of their COVID-19-related economic catastrophe. They anticipate a large amount of bitcoin investment in their country.
Another expectation of the government is that those who haven't exposed to Banking sector , can now connect with the banking system. Third, because Bitcoin is a futuristic technology, it has the potential to portray nation as a worldwide leader.
Bitcoin was made legal in El Salvador for all of the reasons stated above.
All of the preceding exemplifies bitcoin's positive side. However, there are several disadvantages to this. These are significant enough to have an adverse effect on the country.
Bitcoin's consequences:
For starters, bitcoin's price fluctuates. People purchase bitcoins in order to save money at lower rates and then sell when the price rises. People are delighted when prices are high and the value of a stored commodity doubles. However, when prices plummet, they lose money. El Salvador's economic position is among the worst in the world, and if rates are low, it may lead to instability.
Second, there's the issue of anonymity. Bitcoin's most notable characteristic is its anonymity. To whom was the transfer made? What was the total amount of money transferred? What was the source of the transfer? What was the reason for the transfer? Its all little difficult to find out. And, if the government decides to investigate this subject further in the future, this characteristic will become a disadvantage for the government.
Third, avoidance of taxes. Bitcoins, as previously said, provide a high level of privacy. This facility will be a bonanza for tax fraudsters if El Salvador does not control it correctly and does not develop the appropriate tax framework. And when the revenue influx decreases, the system's economic strength deteriorates.
The government's decision and the public's reaction:
Taking a closer look, it appears that not everyone in El Salvador agrees with the government's decision. Some people have spoken out against the law, and some have even taken to the streets. They claim they do not want a currency whose value is always fluctuating. They further say that not all individuals have digital devices such as a smartphone or laptop to take use of this service. They are asking the government on how to accept the bill because there are no needed instruments to engage with the money. This might work against the goal of attracting individuals into the financial system.
The government, on the other hand, has taken this bill so seriously that it has already bought 400 Bitcoins worth $ 20 billion. The government is also handing away $ 20 in bitcoins to everyone willing to join hands. Despite the government's enthusiastic support, the public has had a mixed reaction.
At the end, everyone has a question. Is El Salvador's strategy practically feasible? Putting in place an interest-based currency is no easy task. That is something for which El Salvador should be applauded. People have differing views, notwithstanding the government's enthusiasm. However, this country's bravery deserves to be praised. This is just a baby step in the modern evolution. This country serves as an example for other nations.
The "Panama Island," which has identified these possibilities, is proposing a bill to encourage the usage of bitcoin. As a result, the number of people who wish to follow El Salvador is rising. However, the true consequences of El Salvador's experiment will not be seen for three to four years.
Each country's customs are distinct. Their economic situations are also dissimilar. The world is diverse, and each government has its own method for ruling, governing, and seeking citizen protection. As a result, it is impossible to know or anticipate the bitcoin trend.
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