September 7 will be a day marked in history. It is the day El Salvador becomes the first country in the world to launch a cryptocurrency as a legal tender.
The result of this is that a digital currency will be recognized in an official capacity in a sovereign territory, which will forever alter the perception of cryptos and decentralized systems, taking them out of the backstage of the virtual world, and bringing them to center stage, where they belong.
El Salvador’s problem
It all started with the Bitcoin 2021 Conference in Miami in which the President of El Salvador, Nayib Bukele, announced that his government intended to pass a bill to make BTC a legal tender in the country.
What President Bukele had in mind (such as the other supporters of the Bitcoin adoption in El Salvador had) was to have a fairer fight against inflation, since his country adopted the US Dollar as legal tender in 2001 due to their own weak currency and the very strong trade ties with the US.
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When the US Federal Reserve (Fed) prints too much money (like they did during recent worldwide Coronavirus pandemics), smaller countries that have USD as legal tender suffers as a result. The Fed has through its quantitative easing policy caused a 32% increase in USD monetary supply in just one year.
This was the finishing line for President Bukele who finally decided to put in motion a bill to make Bitcoin a legal tender in El Salvador.
“Central banks [like the US Federal Reserve] are increasingly taking actions that may cause harm to the economic stability of El Salvador…in order to mitigate the negative impact of central banks, it becomes necessary to authorize the circulation of a digital currency with a supply that cannot be controlled by any central bank…”
A decentralized solution
As a solution, the finite supply of Bitcoin, coupled with its decentralized nature, ease of use and the lack of government ability to confiscate BTC from its holders, will likely play a major role as other countries that also suffer from huge inflation waves consider a similar move to El Salvador as a way out of the fiat inflation trap.
The decision already caused controversy, of course. Many are skeptical that this proposal will change anything to mitigate actual economical problems on the ground. But, on the other hand, others were really excited about the idea and wanted to see the results of this implementation.
On August 31, the Legislative Assembly approved a $150 million Trust in order to facilitate the conversion of BTC into USD. And if it’s the case that legislative officials in El Salvador represent the people, perhaps it’s a sign that the populace may be interested in the result of this adoption, since the bill was approved by 64 legislative officials in favor versus 14 opposing for the creation of the trust.
So, here we are, after all the discussion, at the historic moment when it happens.
From now on, we are going to follow the developments of President Bukele’s proposal and the country’s adoption in El Salvador’s economy, daily life and international relations.
We are truly living to tell.