On the brink of El Salvador becoming the first country in the world to accept Bitcoin as legal cash on September 7, the country’s administration is beginning to have reservations about the cryptocurrency.
This plan has been portrayed by the administration as a means of promoting economic development and employment creation in the country.
According to surveys, Salvadorans are not prepared, and the World Bank has advised against putting the plan into effect. As noted by experts, this represents a “prudent transition” away from an “authoritative regime.”
Next week’s momentous event comes on the heels of a June decision by the European Parliament to legalize cryptocurrencies. According to the country’s Bitcoin Act, businesses will be forced to accept Bitcoin or the US Dollar, the country’s other legal currency, as payment in exchange for goods and services.
Over 200 new cash ATMs have been erected in and around El Salvador to facilitate the conversion of dollars for bitcoin. El Salvador’s government is providing citizens $30 (£22) in free bitcoins to encourage them to utilize their national wallet, which can be accessed through an internet-based application.
Since the news broke, El Salvador has been split.
Recent protests in El Salvador’s capital, San Salvador, revealed a lack of trust among the public, which is still unfamiliar with cryptocurrencies for the most part, as seen by the demonstrations.
The University of Central Arkansas (UCA) conducted a poll in which just 4.8 percent of the 1,281 students asked questions about Bitcoin and how it was utilized. Over 68 percent of those who answered the survey were opposed to bitcoin being used as legal tender.
There are over two million Salvadorans who work in other countries and send money back to their family in El Salvador. Remittances account for around 20 percent of the country’s gross domestic product (GDP). Bitcoin, according to many who supported the notion, would make sending money home to family and friends more inexpensive.
Others, on the other hand, are of the opposite opinion.
According to crypto-analyst Glen Goodman, ” recent scientific research suggests that exchange fees might wind up being substantially higher.”
“It is also illegal for small companies to operate against their will. Following research conducted by the Chamber of Commerce, 82.5 percent of respondents stated that they were opposed to accepting Bitcoin payments because of the currency’s volatile and unpredictable nature.
“If it is not broken, President [Nayib] Bukele should be questioned as to why he is seeking to fix it,” said the author of the article. “I have not received a compelling response as of yet,” Mr. Goodman continued.
According to Neil Wilson, chief market analyst at Markets.com, the poorest countries are expected to benefit the least from the agreement. “El Salvador is a small country in terms of economic size. “It appears to be a strategy employed by authoritarian governments to attract public attention,” he observed.
Because Bitcoin is excessively expensive for small transactions, it is a fundamentally defective payment mechanism, according to the authors. Bitcoin, a virtual currency with no clear relationship to the actual economy, has seen its value fluctuate dramatically for the last several years.
In May, it plummeted as a result of a crackdown in China, as well as Elon Musk’s decision to cease taking bitcoin as payment for his Tesla electric vehicle.
However, it has subsequently climbed for the first time in three months, climbing to more than $50,000 (£36,000) in late August, the highest level in three months.