The state bought 400 coins, and Bitcoin officially became the legal tender of El Salvador

Reporter | Slynwick

September 7 is a special day for El Salvador.

From 2 p.m. Beijing time on September 7, El Salvador will officially become the first country in the world to use Bitcoin as legal tender.

On this day, Nayib Bukele, the 40-year-old president of El Salvador, announced on Twitter that the government had purchased the first 200 BTC on Monday and would buy more. Subsequently, Bouclé announced that El Salvador had bought another 200 bitcoins, and El Salvador's treasury held a total of 400 bitcoins.

After the news was sent, the price of Bitcoin rose in response, rising 2.3% during the day, breaking through $52,000, the highest price in nearly three months.

At 1:57 p.m., Boukley couldn't hide his excitement, writing on social media: "There are three minutes left and we will make history." Mr. President's tweet quickly received thousands of responses, congratulatory voices came and the entire crypto community was heartened.

Including Bloomberg, Reuters and other internationally renowned media have reported the news, El Salvador, as a small country in Central America, has gained worldwide attention during this period.

This means that from September 7, Bitcoin will have the same status as the US dollar in El Salvador, where people can use bitcoin to pay for goods, purchase services and even pay taxes. As legal tender, "every economic agent" in El Salvador must accept the use of Bitcoin as a legal payment method under the law.

But this use is not mandatory. On August 23, Bouka confirmed that the use of Bitcoin as legal tender is not mandatory.

"If someone wants to continue to carry cash, doesn't want to get sign-up bonuses, doesn't want to win customers who own Bitcoin, doesn't want to grow the business and pay remittance commissions, they can continue to do so," Mr. Buclay wrote on Twitter at the time.

Over the past three months, the President of El Salvador has spared no effort to bring the bill into force.

On June 9, 2021, the President of El Salvador, who has just celebrated his second anniversary in office, officially submitted a Bitcoin bill to the Legislative Council of the Republic of El Salvador. "The purpose of the law is to regulate Bitcoin as an unrestricted legal tender, giving bitcoin free powers and unrestricted in any transaction, and with any ownership rights owned by public or private, natural or legal persons," the proposal said. ”

Subsequently, the bill was passed by an absolute majority in the Salvadoran legislature, with 62 members voting in favour of the bill, 19 opposed and 3 abstaining.

For the act to come into effect, El Salvador developed a bitcoin wallet for the nationals, "chivowallet", and reserved $30 worth of bitcoin in the wallet of each registered user.

On September 7, with the bill going into effect, Ibrahimovic Boukale announced that the wallet was officially launched in the Apple Store and Google Play, as well as the HUAWEI App Store. According to a screenshot from Twitter netizens, its Apple mobile phone can already download and install the bitcoin wallet.

On August 31, El Salvador released its first official Bitcoin commercial video advertisement, heralding the various applications of Bitcoin after it became a fiat currency. But at the same time, the country's cash transactions, commodity prices and wages will still be denominated in DOLLARs.

To showcase El Salvador to the global public, Ibrahimovic Boukale saw Bitcoin as an important turning point in the country's historical predicament. But not everyone approves of Salvador's move.

The World Bank said on June 17 that it could not help El Salvador achieve its plan to make Bitcoin legal tender due to deficiencies in the environment and transparency.

A World Bank spokesperson said in an emailed statement: "We are committed to helping El Salvador in a number of ways, including improving currency transparency and regulatory procedures. While the government did turn to us for help with Bitcoin, the Bank was unable to support it given its shortcomings in terms of environment and transparency. ”

On June 22, Jamie Guevara, vice president of el Salvador's opposition Matti National Liberation Front, filed an unconstitutional lawsuit accusing the president of a bitcoin bill that could be unconstitutional and harmful to the country. He described the country's bitcoin law as "lacking legitimacy and foundation, and failing to take into account the harmful impact such laws would have on the country." ”

On July 27, the International Monetary Fund (IMF) issued a voice that countries adopting Bitcoin as their national currency could have "extremely bad" consequences.

Tobias Adrian, head of finance at the IMF's Markets Department, and Rhoda Weeks-Brown, general counsel and director of the legal department, said cryptocurrencies such as bitcoin could become popular in countries with inflation and unstable exchange rates, however, the cost could be enormous for an economy. Using it as legal tender, in addition to having issues surrounding macroeconomic stability and the environment, can destabilize domestic prices and the risk that the use of assets may violate anti-money laundering and anti-terrorist financing laws.

In addition to the doubts of these international institutions, a previous report by DeepChain Finance showed that the country's residents did not have enthusiasm for Bitcoin as a legal tender.

Maggie Wu, CEO of Golden Kr Group, who visited El Salvador on July 5, told DeepChain Finance that there has been a two-level differentiation in the people of El Salvador, and some elites who know bitcoin and cryptocurrencies are very concerned about and agree with the change. But for people who don't understand Bitcoin, they don't really care too much, because their cultural level and their financial ability are not very good enough for them to accept Bitcoin very quickly.

Maggie Wu introduced Bitcoin Beach, a popular punch card attraction in El Salvador, where small businesses along the entire coast, such as food and beverage vendors, accept bitcoin payments. But most people don't know what Bitcoin is, and many merchants don't accept Bitcoin, or they don't know how to accept it.

Behind this phenomenon is the fact that the country, with a population of only 6.705 million, the domestic economy is dominated by agriculture, and the nominal GDP of $31.202 billion in 2020 does not yet have cryptocurrency-related infrastructure.

According to Maggie Wu, the situation in July was that the government actually announced the bill first, but there was no way to match its infrastructure. It's like a country today says that it is about to open high-speed rail and open maglev trains, but the country currently has no trains and no railways.

This is in stark contrast to the outcry that Mr. President generated on Twitter.

But in any case, for a region that was mired in civil war a decade ago and rated as one of the most dangerous in the world, neither the dollar nor Bitcoin are the most expensive things. Peace and development are what El Salvador needs most.