BUSINESS + ECONOMY

El Salvador buys 200 bitcoins as the digital currency becomes legal tender

Sep 7, 2021, 7:38 AM
Britney Spears' conservatorship...
SAN SALVADOR EL SALVADOR - MAY 25: President of El Salvador Nayib Bukele speaks during a reception of the Salvadoran Beach Soccer National Team at Presidential House on May 25, 2021 in San Salvador, El Salvador. The team is now qualified for The 2021 FIFA Beach Soccer World Cup to be played in Russia after winning the CONCACAF Qualifier. (Photo by APHOTOGRAFIA/Getty Images)
(Photo by APHOTOGRAFIA/Getty Images)

    (CNN) — El Salvador became the first country to adopt bitcoin as a national currency on Tuesday, kicking off a radical monetary experiment that could pose risks to the fragile economy.

President Nayib Bukele announced late Monday that his government has purchased another 200 bitcoins ahead of El Salvador’s formal adoption of the currency. El Salvador now holds 400 bitcoins, which are worth nearly $21 million at current trading levels.

Bitcoin will be used as legal tender in El Salvador alongside the US dollar starting on Tuesday. Bukele tweeted that the country’s brokers “will buy much more as the deadline approaches.”

Bukele, a right-wing populist who rose to power in 2019, announced the plan to start using bitcoin in June. The law designating bitcoin as legal tender says that all “economic agents” shall accept the cryptocurrency as a form of payment. It also says that tax payments can be made in bitcoin.

Salvadorans will be able to download the “Chivo Wallet,” an application created by the government which will deliver $30 worth of bitcoin to people to promote its use.

“The process of #Bitcoin in El Salvador has a learning curve. Every step toward the future is like this, and we will not achieve everything in a day, nor in a month,” Bukele tweeted. “But we must break the paradigms of the past.”

Some citizens have embraced the technology, while others are wary. José Abraham Cerón, a baker, told CNN that it’s not difficult to deal in bitcoin. But Blanca Estela Ponce, the owner of a nearby tortilla shop, said she prefers cash.

“[Bitcoin is] something new and we don’t have enough information about it,” Ponce told CNN.

El Salvador has partnered with digital finance company Strike to create the infrastructure required.

Cryptocurrencies are held in digital wallets, rather than through a traditional bank account — meaning that people in poorer communities with less access to banks could use bitcoin as a way to gain increased access to their finances.

However, social organizations have asked the Salvadoran government to repeal the law, largely because they fear the extreme volatility of the cryptocurrency.

Bitcoin has recovered some lost ground following a dramatic crash earlier this year, but it remains well below its record high of nearly $65,000 set in April. The price was $51,360 on Tuesday, down 0.7% in the last 24 hours, according to Coinbase.

The International Monetary Fund, which provided an emergency loan to El Salvador last year and is now negotiating another round of lending, has taken a dim view of using bitcoin as legal tender, saying that doing so raises a number of economic, financial and legal issues.

“How do we know what we collect in taxes when bitcoin goes up and bitcoin goes down? How do we plan for expenditures? Remember in April, bitcoin crossed $65,000 and then it dropped almost half of it. That is a problem that the ministry of finance is going to be wrestling with. And it is not an easy one,” Kristalina Georgieva, managing director of the IMF, said recently.

In late July, Moody’s Investors Service pushed El Salvador’s debt rating deeper into junk territory, citing “a deterioration in the quality of policymaking” including the government’s decision to adopt bitcoin as legal tender.

Moody’s said the country remains susceptible to financing shocks that could jeopardize the government’s ability to repay creditors starting in January 2023.

El Salvador’s government is betting that using bitcoin as legal tender will attract new investments. Authorities also hope to reduce commissions paid for sending remittances from abroad.

— Joshua Berlinger, Rafael Romo, Charles Riley and Jill Disis contributed to this report.

The-CNN-Wire
™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Today’s Top Stories

Business + Economy

best before labels...
DEE-ANN DURBIN AP Business Writer

Keep it or toss it? ‘Best Before’ labels cause confusion

Manufacturers have used the labels for decades, but some say "best before" labels have nothing to do with safety and that they encourage food waste.
15 hours ago
Twitter might get bought by Elon Musk after all. Twitter screen shown on phone...
TOM KRISHER, MATT O'BRIEN and RANDALL CHASE Associated Press

Musk offers to end legal fight, pay $44B to buy Twitter

The offer comes just two weeks before the Twitter lawsuit seeking to force Musk to go through with the deal goes to trial in Delaware Chancery Court.
2 days ago
Turkey and cattle farms near Moroni, Utah. Three additional cases of avian influenza have been conf...
Mark Jones

Three additional cases of avian influenza confirmed in Sanpete County

The Utah Department of Agriculture and Food announced Friday that three additional cases of avian influenza have been confirmed on turkey farms in Sanpete County.
6 days ago
utah employment...
Alejandro Lucero

Annual Golden Key Awards presented to local businesses

Golden Key Awards recognize the people and businesses who believe in Utahns with disabilities, said a press release. Nine businesses were recognized today.
7 days ago
A group breaks ground on the Best Friends housing project in Kanab....
Britt Johnson

Best Friends Animal Society building housing for employees in Kanab

Best Friends Animal Society houses its headquarters and sanctuary in Kanab, Utah -- along with about half of its employees.
7 days ago
The Vivint Arena in Salt Lake City is pictured on Tuesday, May 24, 2022. (Kristin Murphy, Deseret N...
Lindsay Aerts

Silicon Summit announces statewide expansion

Silicon Summit will announce their plans for expansion. Starting next year, the two-day summit will be held over one week.
7 days ago

Sponsored Articles

Young woman receiving laser treatment...
Form Derm Spa

How facial plastic surgery and skincare are joining forces

Facial plastic surgery is not only about looking good but about feeling good too. The medical team at Form Spa are trained to help you reach your aesthetic outcomes through surgery and through skincare and dermatology, too.
large group of friends tohether in a park having fun...
BYU MBA at the Marriott School of Business

What differentiates BYU’s MBA program from other MBA programs

Commitment to service is at the heart of BYU’s MBA program, which makes it stand out among other MBA programs across the country.
a worker with a drill in an orange helmet installs a door in the house...
Price's Guaranteed Doors

Home improvement tip: Increase the value of your home by weatherproofing doors

Make sure your home is comfortable before the winter! Seasonal maintenance keeps your home up to date. Read our tips on weatherproofing doors.
Curb Appeal...
Price's Guaranteed Doors

How to have the best of both worlds for your house | Home security and curb appeal

Protect your home and improve its curb appeal with the latest security solutions like beautiful garage doors and increased security systems.
A paper reading IRS, internal revenue service is pictured...
Jordan Wilcox

The best strategies for dealing with IRS tax harassment | You have options!

Learn how to deal with IRS tax harassment. This guide will teach you how to stop IRS phone calls and letters, and how to handle an IRS audit.
spend a day at Bear Lake...
Bear Lake Convention and Visitors Bureau

You’ll love spending the day at Bear Lake | How to spend a day at Bear Lake

Bear Lake is a place that needs to be experienced. Spend a day at Bear Lake.
El Salvador buys 200 bitcoins as the digital currency becomes legal tender