El Salvador, before this, it is estimated that few people in the country have heard of the name of this small country, but in the past few days, this country has done something that shocked the world. Just this past June 9, El Salvador’s Congress voted to approve the president’s proposal to use Bitcoin as a legal tender, and El Salvador became the first country in the world to recognize Bitcoin as a legal currency.
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dollar credit crisis
Although El Salvador is a sovereign country, it has never been able to establish its own independent currency system, and has always used the US dollar as its own legal currency. In the past ten years, the credibility of the US dollar in the international community has gradually declined. After the subprime mortgage crisis, the US dollar has become a tool for the United States to pass on the crisis to the world. El Salvador is naturally one of the victims. Under the impact of the new crown epidemic, the Federal Reserve has released unprecedented water, and the US dollar is facing the largest crisis of confidence in history. Under such circumstances, El Salvador had to consider retreating.
In this case, the President of El Salvador, Nayib Bukele, chose Bitcoin to deal with the financial crisis that he may face next. Bitcoin is a non-sovereign cryptocurrency that does not rely on the issuance of a specific monetary institution. It is calculated according to a specific algorithm and has a constant total amount, which can avoid being manipulated by certain countries to the greatest extent. At the same time, Bitcoin was born after the subprime mortgage crisis in 2008 and was born to resist the economic crisis. This may be one of the reasons why Naib Bukele took a fancy to Bitcoin.
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El Salvadors domestic environment
El Salvador is a country dominated by agriculture, and its overall economic strength is relatively backward. 70% of the people in China do not have bank cards, and they mainly rely on cash for payment. The development of mobile payment in the banking industry is still in a very early stage. If it is directly connected to the Bitcoin payment system, it is undoubtedly the fastest solution, bringing convenience to peoples lives.
The current president, Nayib Bukele, is a relatively young president with a high degree of acceptance of new things. After taking office, Nayib Bukele completed a variety of drastic reforms and achieved good results. Defining Bitcoin as a legal currency this time is also a new attempt at reform. To some extent, Nayib Bukele also represents the ideas of the younger generation, and digital currencies led by Bitcoin will be a trend in the future.
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Impact on El Salvador
After adopting Bitcoin as a legal currency, it will undoubtedly weaken El Salvadors dependence on the US dollar, which will increase the usage rate of Bitcoin. The President of El Salvador wants to attract more bitcoin-related companies to invest in El Salvador. The President of El Salvador announced four major policies to encourage blockchain-related companies to settle in and provide entrepreneurs with permanent residency.
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A New Phase for Bitcoin
With El Salvador positioning Bitcoin as a legal currency, Bitcoin has also ushered in a new historical stage, and many small countries similar to El Salvador have also been eager to try it. Under the impact of the exchange rate of the US dollar, the legal currencies of many small countries have collapsed, and they are seeing their economic fruits being plundered. Under the demonstration effect of El Salvador, Bitcoin may also begin to regard Bitcoin as a life-saving straw in the future.
After more than ten years of development history, Bitcoin has finally started a formal contest with fiat currencies. Although it will be a long process, we always believe that the wheels of history are always rolling forward. Let us wait and see!
