Today June 9, 2021 has become an extremely important date for Bitcoin, since El Salvador's President Nayib Bukele's bill was approved by the country's Congress with 62 votes out of 84. With this, El Salvador becomes the first country to pass a law that converts Bitcoin into legal tender.
And it is that recently we talked about it here on the blog and the Salvadoran president is looking for power in bitcoin solve many economic and social problems of the country, Well, during the Bitcoin 2021 conference, President Nayib Bukele announced that a bill was being prepared for Congress that would make Bitcoin a legal currency in the country and it was.
"The object of this law is the regularization of bitcoin as legal tender, unrestricted with download, unlimited in any transaction", we can read in the first article of the text that now only needs to be ratified by the Head of State behind the project.
Bukele touted the potential of digital currency to enable the most disadvantaged Salvadorans to access a legal financial system, help Salvadorans living abroad easily send money home, and enable job creation.
"In the short term, this will create jobs and help provide financial inclusion to thousands of people outside of the formal economy," Bukele said in his video.
According to some sources, El Salvador is a country with a predominantly cash economy, where around 70% of the population does not have a bank account or credit card.
The Salvadoran President Is conviced of making bitcoin legal tender will solve many economic and social problems of the country.
"It will improve the lives and futures of millions of people," said Bukele.
While Bukele is excited about his project, some are concerned about factors such as volatility of bitcoin and the disruptions it can induce in today's financial system.
Since a clear example is over a period of three months, from October 2017 to January 2018, for example, the volatility of bitcoin prices reached almost 8%. This is more than double the volatility of bitcoin during the 30-day period ending January 15, 2020.
However, analysts say that the use of bitcoin as a currency for developing countries that are currently experiencing high inflation it's interesting if you consider the volatility of bitcoin in these economies compared to the volatility of bitcoin in USD (currently the international trading currency).
Because of this, some economists see Bitcoin as a safe reserve or safe haven, Since since its launch, bitcoin has been defined as a safe haven, and several analysts and publications try to do so based solely on market data.
While this works well for assets and commodities with true longevity in the market, for bitcoin another path is ideal. Reports recently revealed that Iran was using it to circumvent embargoes on its economy.
But other experts are against this idea. According to them, bitcoin is more volatile, less liquid and more expensive to trade (in terms of time and costs) than other assets (including gold, the traditional safe haven), even under normal market conditions. Until the market matures, it would be risky to view Bitcoin as a safe haven.
In addition to these concerns, there is the problem of bitcoin's energy consumption., which continues to grow every year. Currently, bitcoin consume more electrical energy than Argentina. This is one of the conclusions of an analysis by the Center for Alternative Finance at the University of Cambridge published last February. Here is another estimate of the energy consumption of the famous cryptocurrency support network at 1% of that of the whole world. So climate experts warn that wider adoption of bitcoin can lead to energy chaos.
For now, El Salvador's initiative is an isolated case, since although the use of bitcoin is authorized in several countries around the world, none of them have yet taken the initiative to legalize the currency.