Market analysis

El Salvador Just Became Latin America’s First Bitcoin Nation.

article about el salvador adoptin bitcoin as it legal curreny

El Salvador Became First Nation in Latam To have Bitcoin as its Currency

Why crypto is more than a currency and how El Salvador just became Latin America’s first bitcoin nation.

Last week, El Salvador became the first country in the world to allow bitcoin as legal tender alongside the dollar. In other words, it has become an economic medium recognised and accepted by the country’s legal system.

The initiative, heralded by the country’s 40-year-old President Nayib Bukele, was strongly criticized by international financial bodies and wiped out $400 Billion in the crypto’s market value, before a slight rebound.

The government bought its first 400 coins, with a market value of $ 21 million.

It also launched the “Chivo” (“Super” in colloquial language) e-wallet needed for day-to-day bitcoin transactions with his mobile phone and offered a $30 welcome when downloaded.

For the head of state and his government, bitcoin will allow Salvadorans to save $ 400 million in bank charges when sending money by the diaspora, especially in the United States, which represents 22% of GDP.

The cons

The Financial Times also points to the pressure that this system places on the international reserves. The challenge here is to ensure its convertibility, especially if the price of Bitcoin collapses.

Of the 6.5 million inhabitants of El Salvador, 80% do not know what bitcoin is, nor what it is worth… On the other hand, 70% understand that it is very volatile, and oppose its adoption.

Observers explain that this measure will have a negative impact on the living conditions of Salvadorans due to the high volatility of the exchange rate of bitcoin, and will have an impact on the prices of goods and services.

The pros

Almost 25% of El Salvador’s GDP comes from remittances, and with approximately USD 400 million in transfer fees, the President sees this initiative as beneficial to Salvadorians abroad. Because bitcoin transfers are presented as free via the national app, they will save large amounts of money when sending funds back home.

The government has also guaranteed convertibility to some extent with the creation of a dedicated USD 200 million fund.

Breaking the Dollar grip and making waves

This development is yet another attempt by Latin American countries to decrease their economies’ dependency on USD and raw exports.

As an add-on to the new law and an incentive to attract capital, the Salvadorian government has announced a tax exemption for foreign investors on their Bitcoin income.

If this movement survives the initial period bump-free, it could make waves, particularly in the region.

Panama could be the next in line to legalize cryptocurrencies, as the country’s Congress is trying to pass a Bitcoin and altcoins law.

Also, Mexico has decided to speed up the development of a Bitcoin law and Paraguay has hinted that the country could turn to cryptocurrency.

Traded on markets any soon?

Canadian celebrity investor Kevin O’Leary announced last week plans to double his investment in cryptocurrencies before the end of the year.

He explained that regulators who give financial firms the green light to view Bitcoin (BTC / USD) as an asset would see at least a trillion dollars entering the currency. He also said that the SEC’s approval of a BTC exchange-traded fund (ETF) could also help the coin achieve this feat.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.


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