El Salvador has officially become the first country in the world to accept Bitcoin as an optional legal tender after the digital currency was officially adopted on Tuesday, 7 September 2021. Now businesses in the South American country can accept the controversial cryptocurrency as payment. The move stems from June this year when El Salvador approved President Nayib Bukele’s proposal to embrace cryptocurrency.
Other developing nations are closely watching El Salvador.
Populist President Bukele is regarded as a controversial figure, and his administration and officials have previously faced accusations of alleged corruption and graft. In May, for example, the United States reportedly named five of Bukele’s ministers and aides as being corrupt and diverted foreign aid funds away from the country’s government institutions instead of to local civil society groups. However, President Bukele championed Bitcoin adoption as a way to help low-income countries like El Salvador move from a large cash economy to a digital economy, where a person’s bank account is essentially their smartphone. And roughly 70% of people in El Salvador do not have bank accounts or credit cards.
El Salvador just bought 200 new coins.
— Nayib Bukele 🇸🇻 (@nayibbukele) September 6, 2021
Global financial regulators did not approve of El Salvador’s move into bitcoin.
The move surprised many, and the World Bank (the international lender to developing nations) refused to help implement it as legal tender due to concerns over transparency and the environmental impact of Bitcoin mining. Rating agency Fitch also warned of greater risks for banks due to the El Salvador law. It said the move could open floodgates to money laundering, increase banks’ exposure to regulatory risks. And central banks and financial regulators have repeatedly warned of bitcoin’s notorious volatility and said buyers should be prepared to lose all their money.