Enthusiasts call for the massive purchase of bitcoins 0:50
(CNN Business) -
El Salvador became the first country to adopt bitcoin as its national currency on Tuesday, kicking off a radical monetary experiment that could pose risks to the fragile economy.
El Salvador's President Nayib Bukele announced Monday night that his government had bought another 200 bitcoins before the currency's formal adoption.
With this, the country added a total of 400 bitcoins in its possession, which are worth almost US $ 21 million at current commercial levels.
This Tuesday, with the new bitcoin measure underway in El Salvador, Bukele reported that the nation acquired 150 more bitcoins, bringing the total to 550.
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Bitcoin will be used as legal tender in El Salvador along with the US dollar starting this Tuesday.
Bukele tweeted that the country's brokers "will buy a lot more as the deadline approaches."
Bukele, a right-wing populist who came to power in 2019, announced the plan to start using bitcoin in June.
The law that designates bitcoin as legal tender says that all "economic agents" will accept cryptocurrency as a form of payment.
It also says that tax payments can be made in bitcoin.
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Nayib Bukele and her laser eyes in support of bitcoin on Twitter
Salvadorans will be able to download "Chivo Wallet," an application created by the government that will deliver US $ 30 in bitcoins to people to promote their use.
"Like all innovation, the #Bitcoin process in El Salvador has a learning curve. Every road to the future is like this and not everything will be achieved in one day or one month," Bukele tweeted.
"But we must break the paradigms of the past. El Salvador has the right to move towards the first world."
Some citizens support the use of this technology, while others are reluctant.
José Abraham Cerón, a baker, told CNN that it is not difficult to trade in bitcoin.
But Blanca Estela Ponce, who owns a nearby tortilla shop, said she prefers cash.
"(Bitcoin is) something new and we don't have enough information about it," Ponce told CNN.
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El Salvador partnered with digital finance company Strike to create the necessary infrastructure.
Adopting bitcoin in El Salvador can cause legal and economic problems, says IMF
Cryptocurrencies are kept in digital wallets, rather than a traditional bank account, which means that people in poorer communities with less access to banks could use bitcoin as a way to gain greater access to their finances.
However, social organizations have asked the Salvadoran government to repeal the law, largely because they fear the extreme volatility of the cryptocurrency.
Bitcoin has regained some of the ground lost after the dramatic crash earlier this year, but it remains well below its all-time high of nearly $ 65,000 that it hit in April.
The price was $ 51,360 on Tuesday, 0.7% less than in the last 24 hours, according to Coinbase.
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The International Monetary Fund (IMF), which granted an emergency loan to El Salvador last year and is now negotiating another round of loans, does not welcome the use of bitcoin as legal tender, as it claims to do so raises a number of economic, financial and legal problems.
"How do we know what we collect in taxes when bitcoin goes up and down? How do we plan expenses? Recall that in April, bitcoin surpassed US $ 65,000 and then fell by almost half. This is a problem with which the Ministry Finance is going to fight. And it's not easy, "Kristalina Georgieva, managing director of the IMF, said recently.
In late July, Moody's Investors Service placed El Salvador's debt rating to "junk", citing "a deterioration in the quality of policymaking," including the government's decision to adopt bitcoin as a tender. legal.
Moody's said the country remains susceptible to financial shocks that could jeopardize the government's ability to pay creditors starting in January 2023.
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The government of El Salvador is betting that by using bitcoin as legal tender, new investments can be attracted.
The authorities also hope to reduce the commissions paid for sending remittances from abroad.
According to the Central Reserve Bank of El Salvador, last year the country received remittances worth just over US $ 5.9 million.
Joshua Berlinger, Rafael Romo, Charles Riley, and Jill Disis contributed to this report.
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