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El Salvador is the first country in the world to accept bitcoin as a legal means of payment

2021-06-10T11:57:37.002Z


The law that was approved this Wednesday creates a public trust of $ 150 million that will guarantee the automatic convertibility of the digital currency to dollars. But experts warn that the country runs the risk of "becoming a dirty money laundromat."


The Government of Nayib Bukele in El Salvador has approved a law for the cryptocurrency bitcoin to be used as a legal exchange currency, despite the risks that the implementation of this technology could entail, including tax evasion and money laundering.

The Bitcoin Law, approved in the last hours of Tuesday by the Salvadoran Legislative Assembly, will come into force within 90 days and will

make El Salvador the first country in the world to accept bitcoin as a means of payment

.

However, so far very little is known about how such a system will be implemented and the benefits it will bring to the general population.

[The price of the cryptocurrency bitcoin surpasses $ 20,000 for the first time in history]

For the economist Ricardo Castaneda, one of the experts who warns about said risk, the law "should not come into force in 90 days because it takes more time to explain to the public how it would work, what the benefits would be and what implications it would have" .

Additionally, the economist from the Central American Institute for Fiscal Studies pointed out in an interview with the Efe agency: "I think that before it comes into force,

there should be technical studies that really allow us to

verify that the benefits will be greater than the costs

."

Bukele, 39, who maintains a popularity rate above 80% and has made the social network Twitter his preferred communication tool, described it as an idea that could contribute to the progress of El Salvador.

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What is bitcoin and how will it work?

Bitcoin, originally created to be money outside the control of governments, can be used in any transaction, and businesses must accept payments in that digital currency, except those that lack the technology to do so.

The US dollar will continue to be the currency of El Salvador and no one will be obliged to pay in bitcoin

, according to the law passed on Tuesday.

The digital currency seeks to be an alternative to government-backed money, it is based on complex mathematics, data encoding cryptography (hence the term cryptocurrency), enormous computing power, and a global ledger called blockchain that records All Transactions.

No central bank or other institution defines its value

, which is fully set by people who trade bitcoins and has fluctuated over time.

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Bitcoin and other popular digital currencies, such as ethereum and dogecoin, rose on Wednesday according to the specialized site Coindesk.

Bitcoin, which traded at $ 60,000 this year, was up 10% to $ 36.05.

"All restaurants, all hairdressers, all banks ... everything can be paid in US dollars or bitcoin, and no one will be able to reject that form of payment," said Bukele during a conference on social networks with thousands of users of the cryptocurrency in the United States while the bill was discussed Saturday night in the Legislative Assembly of El Salvador.

The exchange rate between the US dollar and bitcoin will be established by the market

, and all prices may be expressed in bitcoin, although for accounting purposes the dollar will continue to be the reference currency.

[Nayib Bukele celebrates two years in the Government with a high popularity, but involved in criticism]

The Government will promote training so that people can access transactions with bitcoin, which is already used in black markets to avoid supervision by the authorities.

The Ministry of Economy ensures that

70% of Salvadorans lack access to traditional financial services

, and pointed out that "it is necessary to authorize the circulation of a digital currency whose value obeys exclusively free market criteria" to boost the country's growth .

"The Bitcoin law is ambitious, but simple, it is also well structured so that it has 0 risk for those who do not want to take risks.

The Government will guarantee the convertibility at the exact value in dollars at the time of the transaction, "said Bukele on his Twitter account.

Salvadoran President Nayib Bukele speaks at a press conference in San Salvador, El Salvador, on Friday, June 4, 2021. EFE / Rodrigo Sura

The law will create mechanisms to help Salvadorans quickly convert the payments they receive in bitcoins to dollars, especially to small businesses, which will help them avoid the risk of a value collapse as has happened in recent days.

A trust of 150 million dollars

The law creates a government trust that will guarantee automatic convertibility to dollars.

"They have to accept bitcoin, but they don't have to take the risk," Bukele said.

“We can win or lose some money, but it doesn't matter.

The purpose of the trust is not to make money, but to support bitcoin as a legal tender digital currency. "

The $ 150 million trust was the aspect of the law that attracted immediate attention.

"I don't know how they are going to sustain trust, because if they are going to have all those bitcoins coming in and all those dollars coming out for the bitcoins, because they will be freely tradable, it will be a way to clean up dirty bitcoins," said David Gerard, author of the book. 'Attack of the 50 Foot Blockchain'.

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Without very rigid controls on movements with bitcoins or full rules for identifying clients,

"they are going to become a money laundering."

In addition, Bukele pointed out that whoever invests three bitcoins in El Salvador - about $ 105,000 today - will have the right to permanent residence.

Bukele's New Ideas party has a supermajority in the new Legislative Assembly that took office on May 1.

On its first day, the assembly removed magistrates from the Constitutional Chamber of the Supreme Court of Justice and later replaced the attorney general, raising concerns from the United States and others about Bukele's concentration of power.

Other countries in the region, such as Venezuela and the Bahamas, have introduced digital currencies, although none have adopted bitcoin, the original cryptocurrency.

Getty Images

Professor of the Higher School of Economics and Business (ESEN) Carlos Carcach told

The Associated Press

that "it is not necessary or convenient to give something like bitcoin the character of legal tender", although he added that "as long as there is someone that accepts the payment with bitcoin, like accepting dollars, there would be no problems ”.

He stressed that bitcoin is extremely volatile so "

you run the risk of becoming rich and the next day being poor

.

"

The opposition deputy Rodrigo Ávila, from the Nationalist Republican Alliance party (Arena), criticized that it had not been sufficiently discussed in the Assembly or heard the testimony of economists and cybercrime experts.

US authorities have said that bitcoin was used to pay the ransom for the cyberattack against Colonial Pipeline that caused the operator of the largest oil pipeline in the United States to shut down operations last month.

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The decision adopted in El Salvador was reminiscent of November 30, 2000, when the country adopted the dollar as its currency, in a measure approved at midnight by the assembly that Arena controlled at the time.

Last year El Salvador received some 6,000 million dollars in remittances sent by Salvadorans living abroad and that represent 16% of the gross domestic product.

Bukele noted that bitcoin could eliminate the costs of sending remittances to the country

.

"This is not something just for the rich, it is for everyone," said Bukele, 39, who mentioned the power of cryptocurrency to loosen control of central banks and increase the decision-making capacity of young entrepreneurs.

“We build our own future.

Why do we have to resign ourselves to a dystopian future? "Said the president, who enjoys the moment without fully understanding the change in international finance driven by his small country." This will be a big change, not for El Salvador, but for the world. It's beautiful to be part of a huge change in humanity. "

With information from The Associated Press and Efe.

Source: telemundo

All news articles on 2021-06-10

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