Last September, the Central American country El Salvador decided to use bitcoin as its legal tender, becoming the first country to use bitcoin officially. Although the starting point is that it does not want to be constrained by the United States, the country has left the construction of the currency system in the hands of the Americans hands and finally let the collapse of Bitcoin drag down the national economy. So let’s take a look at the magical operation of this country.
As we all know, Musk, the president of Tesla, is a loyal fan of cryptocurrencies. He has single-handedly brought the cryptocurrency “DOGE” to fire and is regarded as the spokesperson of cryptocurrency walking.
The newly listed Antminer L7 is designed to be a powerful miner for mining Dogecoin and Litecoin, which also provides more ways and options for people to obtain Dogecoin.
According to the British “New Scientist” report on February 12, when promoting cryptocurrencies, El Salvador’s President Nayib Bukele (Nayib Bukele) is bolder than Musk; it can be called a national force to pave the way for the legalization of Bitcoin.
The matter went back to June last year. Finally, El Salvador’s Congress approved President Bukele’s proposal on bitcoin, which will become the country’s legal tender from September 7, and all businesses must accept bitcoin as payment.
However, Bitcoin itself has excellent risks. On the one hand, the currency value of Bitcoin is highly volatile, and on the other hand, Bitcoin itself is opaque and difficult to supervise.
Despite this, Salvaldo insisted on passing the bill because the country uses the US dollar as its legal tender, and inflation in the dollar would also affect its economy. Using Bitcoin may act as a “hedging,” get rid of the dollar’s influence on your country’s financial system.
At the same time, the country has many cross-border transactions, accounting for one-fifth of the country’s GDP. Cross-border transactions require hefty transaction fees, and most traders do not have bank accounts. On the other hand, Bitcoin can provide fast and cheap cross-border transactions without the need for people to open a bank account.
The day before the regulations took effect, Bukele himself excitedly announced on Twitter that he had just purchased 200 bitcoins, with a total of 400 bitcoins in his account. As a result, Bitcoin crashed to $7,000 the day the regulations took effect. But he continued to buy 150 bitcoins at the bottom price.
Salvador distributes a dedicated Chivo wallet to each citizen, containing $30 worth of bitcoin, which can be used for everyday purchases and government tax payments.
After the bill came into effect, the man’s approval rating in El Salvador did not drop but rose, reaching as high as 85.1% at one point. As a result, there was a cheerful atmosphere all over the country.
The ideal is complete, and the reality is very skinny. According to New Scientist magazine, the project needed a significant overhaul just half a year later.
Many citizens complained that many merchants did not support bitcoin payments; sometimes, bitcoins even disappeared from accounts; some merchants took advantage of the loopholes in the Chivo wallet to steal the government’s wool. What’s more outrageous is that if paying with Bitcoin, the system takes 1 hour to process the transaction.
Now, El Salvador has decided to let an American company help “patch” these problems, making the infrastructure of bitcoin payment more solid; simultaneously, the Chivo wallet will also adopt the Lintning technology to shorten the transaction time.
Fitch, the U.S.-based credit rating agency, adjusted El Salvador’s credit rating to “junk” despite Bitcoin’s plummeting value. And just last month, the International Monetary Organization (IMF) warned El Salvador that it should abandon Bitcoin as legal tender. But El Salvador responded aggressively that no international agency could interfere with El Salvador’s decision.